Arval: Mission accomplished as Arval surpasses its market share target

Arval has surpassed its market share target and switched its focus to existing partnerships and a bigger service offering, Stephen Briers reports.

For almost four years, the need to win business has been all-consuming for Arval and its chief executive Benoît Dilly.

It was the unambiguous mission handed to the Frenchman when he was appointed in September 2013. He told Fleet News at the time: “We want all parts of the business to grow. Our mindset is permanent momentum.”

Well, mission complete. A combination of growth through organic means and via the European acquisition of GE Capital Fleet Services, has seen Dilly surpass his target of “8-9% market share” – it took 10% of the 2016 FN50.

“We didn’t have the size or the market share that we needed in the UK so our focus was on growth, and growing quicker than our competitors,” Dilly tells Fleet News today at Arval’s UK head office in Swindon.

“Since the beginning of 2017, in terms of fleet size and market share, we are where we need to be.”

Now sitting on a risk fleet of some 160,000 cars and vans, divided equally between corporate and small- to medium-sized enterprises (SMEs), Arval has formulated a new strategy: to offer more and better services to existing customers and partners (such as brokers, dealers and manufacturers).

“We are changing our approach to the market. We are not focusing on growth, although we will keep our eye on our competitors and we may review that if we see the market grow quickly because we aim to stay within 8½-9% market share,” Dilly says.

“Our focus now is existing partnerships and customers. For corporate customers, we want to offer more services, such as digital interaction, connected cars, driver behaviours, accident management and insurance. For SMEs, we are working with dealers and brokers to ensure they have all the tools to offer the right product and information to the customer.”

Arval “rebooted” its corporate proposition two years ago – at the time it accounted for just over 40% of its business – and Dilly believes this channel offers great potential, not least for outsourcing contracts.

He is heavily promoting the benefits to companies of outsourcing their fleet operations, typically in a phased approach, and the strategy is working, with a growing proportion of customers choosing to offload management responsibilities to Arval.

With the offload goes the role of fleet decision-maker; in the majority of cases, Arval’s relationship is with finance, procurement, HR or a mix. Dilly recognises that this means the knowledge base lies with his account team but says clients do not see this as a risk.

“When they outsource to us, we never talk again to a fleet manager. The customer is not an expert so that gives us a duty to be accurate and clear about what it means in tangible terms – which means there is a higher level of SLAs, reporting and price benchmarking,” he says.

“You could see this as a risk, but our customers see the reward. That’s why we do it in a step-by-step approach, one service at a time, not all in one go.”

Does it result in longer relationships, as companies are more reluctant – or less able – to re-tender?

“It can result in contract extensions, but we understand that some companies have to tender every few years,” Dilly says. “But it’s better to be in the driving seat during a tender with an outsourced customer than in the challenger seat. And in the past four years we have not lost a single outsource customer.”

Around 60% of Arval’s corporate business is on sole-supply contracts and, of those, 45% have a very high level of outsourcing. Dilly predicts this will grow further.

Unlike some of his competitors, who focus on sole-supply agreements, he is comfortable winning business on a multi-supply basis. Arval is on the verge of launching a new reporting tool which enables these types of customers to aggregate data from multiple funders on one management system.

Called Total Fleet, the system gathers data from Arval and its competitors via a third party supplier – Dilly won’t say who – which sends consolidated reports direct to the customer. Leasing companies can see their own information but no one else’s – unless the fleet specifically requests Arval to manage the reporting on its behalf.

Dilly has two objectives with Total Fleet: provide consistent information to customers and enable them to benchmark their providers.

“It’s a leap of faith that as a leader in the industry, delivering customers significant information on their global fleet will give us an opportunity to give them more services and improve our relationship with them,” he says.

“But we don’t have a clear plan or target to add an additional number of vehicles – it’s not about that.”

Arval’s organic growth has been impressive during a period in which it was integrating GE’s 28,000 vehicles, products and processes with its own. Indeed, Dilly points out that an equal proportion of the 55,000-unit growth over the past two years has been organic.

While it would be easy to claim that this success has come from offering perhaps overly competitive deals, Dilly insists that Arval takes a measured and long-term view when writing contracts. This, he believes, will serve the company well over the next few years when residual values are expected to come under pressure following several years of huge registrations growth.

With Personal Contract Purchase (PCP) responsible for fuelling growth in the private market, enabling used car buyers to choose a new car for the first time, there is already a surplus of cars returning to market.

“It’s happening already, even if the market isn’t willing to recognise it,” Dilly says. “It is affecting our quotes in the market – when RVs go down, it makes the leasing price more expensive – and others are also being more cautious on RVs. That suggests to me that everyone is seeing it, even if they don’t want to say it.”

Not everyone is reacting with sensible pricing though, according to Dilly, which will store up problems for the future.

“Some companies are making mistakes now given what we see from our customers,” he says. “Some will be put at risk; it’s one of the sector’s biggest challenges at the moment.”

Why Arval and GE means ‘best of both worlds’

Asked whether the integration of the GE business has been completed, Benoît Dilly gives a seemingly contradictory rely.

“It’s completed and achieved and it’s never completed and achieved,” he says.

Explaining his cryptic message, he adds: “The integration in terms of the convergence of products, price and systems has been achieved with a common approach to relationship management. 

“What’s never achieved is that the more outsourcing we have with our customers, the more we have to do with them and the longer the transition takes. 

“We monitor every customer and track their expectations to make sure we are delivering at least what they got from GE, but ideally more than that.”

Arval took a number of learnings from the GE business and weaved them into its own processes. They include GE’s toolbox for new customers, which Dilly describes as “brilliant”. He also seized GE’s approach to customer interaction through its focus groups.

“It’s not only Arval rolling out processes; it’s taking the best of both worlds, and that has been to the benefit of all customers,” Dilly says.