Despite the impact of the health crisis on the automotive sector, the used vehicle market is booming. The banks' fleet management subsidiaries have seen their results improve since the start of the Covid-19 pandemic.
Strong earnings growth for Arval and ALD Automotive
Banks, via their fleet management subsidiaries, are benefiting from the increase in used vehicle resale prices observed since the start of the pandemic. The upward trend for the whole of 2020 is confirmed in the first half of 2021.
There are a number of reasons for this phenomenon, not least the decline in sales of second-hand vehicles by traditional rental operators such as Hertz and Europcar, and the renewed interest in car travel due to fears of viral contamination on public transport.
Several banks saw their automotive subsidiaries' results soar, such as BNP Paribas with its subsidiary Arval, whose outstandings rose by 11%, and Société Générale with its subsidiary ALD Automotive, whose earnings increased by 70% to 352 million euros.
In the first 6 months of 2021, ALD Automotive sold no fewer than 169,000 used vehicles, a volume never before achieved in the same timeframe. In the first half of 2020, the Société Générale subsidiary had sold 126,000 second-hand vehicles.
Sales for the first half of 2021 represent a total of 125.3 million euros, and the average sales margin per vehicle has risen from a negative value of -92 euros in the first half of 2020 to 740 euros. In addition, ALD Automotive has broken a record since its IPO in June 2017, with its residual value reaching 1058 euros in the second quarter of 2021.
France's used vehicle market particularly buoyant
The banks' fleet management subsidiaries are not the only ones to benefit from this boom in the used car market. The financing subsidiaries of carmakers are in great demand, and are seeing prices soar as a result of strong demand for recent used cars.
Bart Beckers, Sales Director of BNP Paribas subsidiary Arval, also explains the rise in demand by the longer lead times of car manufacturers, impacted by the shortage of semi-conductors.
The Arval Group's financed fleet increased by 6.4% at the end of 2020 over a one-year period. The subsidiary also recorded an increase in earnings on vehicle disposals, up 23.3% on 2019.
Even if the health crisis has boosted the used car market, it has already been very dynamic in France for three decades. In fact, it is twice as large as the market for new vehicles in France.
However, two-thirds of used car sales are still made directly between private individuals.