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According to Frost & Sullivan’s research, total passenger vehicle sales in the 25 markets studied in 2020 (referred to as EU25 from now on) were 12.7 million, down 22% from 2019, with 1.5 million sold in Russia, down 9% from 2019. For 2020, within the EU25 markets, the ratio of leasing registrations (operational leasing, financial leasing, and private leasing) is 35.2 %, whereas leasing registrations in Russia are only 9.8 %  of total passenger vehicle registrations. Despite the economic slowdown and budget cuts, particularly in Western European countries, new purchases through the operational leasing channel accounted for 16.9% of passenger car registrations, or roughly 2.2 million vehicles.

Following the economic downturn, the European passenger vehicle market is expected to grow at a faster rate than the Russian market, with a CAGR of 5.0 %  from 2020 to 2025, compared to 3.1 % in Russia. The opposite trend can be seen in the LCV segment, where the overall registrations currently estimated at 1.9 million in the EU25 and 105,000 in Russia, are expected to grow at a CAGR of 7.8 % in Russia, compared to 5.6 % in the EU25 countries.

According to the research, the main driver of the Russian market is SMEs’ demand, which will continue to be a key driver of the market. The high number of taxi businesses that are currently undergoing fleet replacement is another unique feature of the market, which is why the CAGR for passenger vehicle fleet registrations is estimated to be 6.7 % between 2020 and 2025, compared to only 2.8 % for EU25 countries.

Russia’s operational leasing companies purchased over 11K passenger vehicles in 2020, putting it in 21st place behind Hungary and Portugal in terms of operational leasing registrations. The performance of the Russian operational leasing market is expected to remain stable in the short to medium term, as the market is heavily reliant on financial leasing as the primary method of leasing new vehicles.

In the top 15 rankings for financial leasing registrations, only Germany, the largest European market for financial leasing vehicle registrations, is ahead of Russia. Despite the pandemic, the Russian market is ahead of countries like Poland, France, and Sweden, with over 136k new vehicles registered in financial leasing by 2020, up from 118k in 2019.

Mature leasing markets such as the United Kingdom, France, Germany, Belgium, the Netherlands, Spain, and Italy are expected to grow steadily, with the overall European leasing segment being primarily driven by emerging markets where leasing is gaining traction. However, the EU25 countries continue on their recovery path following the Covid-19 crisis, operational leasing is expected to grow at a CAGR of 5.4 % between 2020 and 2025, while financial leasing is expected to grow at a CAGR of 3.2 % during the same period. Russia is expected to grow at a 19.5 % CAGR for operational leasing and a 5.0 % CAGR for financial leasing over the same period, making it a potential target for global fleet and leasing companies as well as local investors looking to capitalize on market opportunities.

The need for leasing providers to cover vast territories is one of the main restraints on the Russian fleet & leasing market, which poses problems, particularly for operational leasing players, who struggle to provide adequate servicing coverage for their vehicles. However, the leasing market, as well as the fleet segment in Russia, are expected to continue to mature and grow, particularly in and around large cities.

Growth in the leasing market is expected in the light commercial vehicle segment (up to 3.5 tons), where demand for this vehicle type has increased due to an increase in last-mile deliveries. In the EU25, where leasing accounts for 43.7 % of LCV registrations in 2020, operational leasing is expected to grow at a rate of 7.2 % between 2020 and 2025, while financial leasing is expected to grow at 5.2%.  After France, Germany, the United Kingdom, and Poland, Russia is ranked fifth in the financial leasing countries ranking for LCVs with a leasing penetration rate of 25.3% in 2020. This accounts for a penetration rate of 24.4% for financial leasing and 0.9% for operational leasing which are likely to grow marginally to 27% and 2.7%, respectively, in 2025.

New Trends and Future of the Leasing Market

Western European leasing companies are still transitioning to become mobility service providers rather than traditional leasing companies, as the economic downturn has resulted in more complex taxation systems and budget cuts due to fleet downsizing. The solutions are more adaptable, with services for trains, public transportation, bicycles, taxis, corporate carsharing, and other modes of transportation. This is the reinvention and adoption of fleet and leasing players as a result of new consumer trends and expectations. In the Western European region, motivational leasing products are important in addition to mobility solutions. Employers in the United Kingdom are using salary sacrifice schemes and motivational leasing solutions to provide vehicles as benefits. According to Frost & Sullivan research, approximately 55 % of vehicles in Western Europe are classified as a perk, but this figure is estimated to be less than 15 % in the Russian market. In the medium term, the increasing adoption rate of leasing solutions on the Russian market has set the stage for motivational leasing products to emerge.

Another important trend that the Russian market is missing is the shift to electric vehicles. While only a few hundred electric vehicles are registered each year, we anticipate that in the long run, as more makes and models provide greater diversity in the electric vehicle segment, the Russian market will begin to show interest in alternative powertrains. However, this is not a trend that will have an impact on the market for another 7–10 years, which is why the primary focus is still on educating customers (particularly corporations) about the benefits of leasing, attracting more investment in developing a good servicing network, and beginning to offer product diversification aimed at increasing the flexibility of leasing solutions.

Octavian Chelu

Octavian Chelu leads the Fleet & Leasing team at Frost & Sullivan, tracking the evolution and development of the fleet & leasing market across 41 markets worldwide, as well as the detailed fleet segmentation analysis (powertrains, sales channels etc.) and mobility services evolution. With over 17 years of experience in product and business development in different industries, his current consultancy expertise is focused on the company car market and its financing types, mobility services development, and dedicated consultancy projects based on specific OEM and financing companies' needs.

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