Vehicle leasing is on the agenda today, as Adrian Maidment talks with Dennis Kelly, Director of FleetPartners NZ.
FleetPartners is New Zealand’s leading provider of vehicle leasing, fleet management and heavy commercial vehicle leasing.
During the podcast, we firstly look at leasing overall. Then, focus in on the leasing of EVs, and the huge impact the growth of EVs is having on the leasing industry, and the motoring industry in general.
Mentioned in interview: 🎙️
FleetPartners: https://www.fleetpartners.co.nz/
FleetPartners Podcast: https://www.fleetpartners.co.nz/resources/podcast
For more on EV Quest: ⚡️
✅ https://evquest.co.nz/
✅ https://www.instagram.com/evquest/
✅ https://www.linkedin.com/in/adrian-maidment/
TRANSCRIPT (Abridged)
Adrian: Vehicle leasing is on the agenda today as I talk with Dennis Kelly, Director of FleetPartners NZ. FleetPartners is New Zealand’s leading provider of vehicle leasing, fleet management and heavy commercial vehicle leasing. Hello Dennis.
Dennis:
Hi Adrian. Hey, thanks for the opportunity. It’s good to catch up.
Thanks for the intro. A little bit about our background FleetPartners. We actually commenced in 1977. Down in Christchurch, believe it or not, as Avis Lease. So absolutely the pioneer of motor vehicle leasing in the New Zealand market. . We changed our name to Ascender Fleet Partners in 1996 and at that stage that’s when the ANZ had actually come in and purchased Avis Lease and stayed as Ascender Fleet Partners, which is a brand a lot of Kiwis are probably very probably recognized through to 2006 when ANZ sold the business to private equity.
And so we dropped Ascender and just became plain old FleetPartners as we’ve stayed ever since. We listed on the ASX Australian Stock Exchange in 2014. And just give you listeners a bit of a sense of the size of the business we’ve got 2 billion Australian dollar’s worth of vehicles out on lease currently in Australia and New Zealand.
That’s 90, 000 vehicles. It’s cars like commercials, trucks, heavy commercials and trailers and so forth. And us Kiwis, we’re about 25 percent of the group. Pretty much 25 percent on every metric size of the portfolio, number of vehicles profit wise. We’ve got four offices in New Zealand. Auckland, where I’m speaking from, is our, is our head office.
Then we’ve got Hamilton, Wellington and Christchurch. You mentioned market share, we’re sitting at number one, arguably number one.
All of our customer facing and support functions are actually based here in New Zealand, and I make that distinction as against other businesses that might have, you know, parts of their support functions offshore and all decisions are made locally.
You won a customer award, just it was on your Facebook?
Yeah, we’re pretty chuffed with it. Yeah, the team we were not expecting because it was our first year of applying. And going through that process and I have to say the team who sit right in front of me right now we’re absolutely delighted to win that award.
There’s a lot of works gone into that. So that’s our sales support area. I think I mentioned like customer wise. We are business to business only and we’ve got. Just on 3, 000 customers. Anything from some of our large multinationals and corporates where they’ve got a thousand vehicles with us, right down to heaps of plumbers and electricians and small business operators.
And that’s, New Zealand’s about, Kiwis are about small business. And that’s, that’s the place we. Most of those large customers and many of the small ones have been with us forever as sole supply. Some of our longest standing customers have been with us 30 years, so we kind of say in some respects were a bit boring.
Because all we do is motor vehicle leasing, but we like to think like we’re sniper rifle were really. We’re really good at what we focus on.
I was quite surprised how big you were, because I’ve been on the website, Kiwi website, and it’s like, oh, I’ll go on the Australian website. I was like, jeez, there’s a lot going on there.
Why do people lease?
It’s a question that probably doesn’t get asked enough to be honest, like I think the way I’d, I’d summarize it, if you think about from a, from a business’s point of view, it’s all about best use of your capital, right? If you, you and I are shareholders in a business and we’ve got limited capital, limited resources, you want to be investing that capital and stuff that makes money.
Like if we’re. I don’t know, growing fruit, or we’re building staff, or we’re exporting, or we’re importing, whatever we might be, even if, you know, real retail, investing in stock that sells, where you’re getting really decent margins, that’s where you want to tie your capital up rather than going out and buying a vehicle, like vehicles depreciate.
I’ve been in this game far too long, but you know, I’ve never seen vehicles go up in value. They’re always going down. It’s just how fast they’re going down in value. And you know, most businesses are absolute experts in what they do, but vehicles isn’t what they do. Vehicles is what we do. So, hence leasing.
Leasing gives you certainty first and foremost. There’s one monthly rental, covers everything. Covers all the aspects of maintenance, tyres, servicing, repairs, windscreen replacements, managing of fuel, managing of charging if you’re in EV, even things like accident management, roadside assist, driver training, they all can be wrapped up in one monthly rental.
That rental is 100 percent tax deductible as a business expense. And we just see it’s just a far better solution to a business over the options of owning or using you know, their bank funding lines or using finance company funding lines. Why would you do that for stuff that’s a depreciating, a depreciating asset?
And the last bit I’ll toss in is that, you know, we Kiwis, we’re not good at bragging, but we buy more vehicles than most businesses in New Zealand. So we’ve got really good buying power for buying the vehicle in the first place. And then with maintenance and repairs we work with our suppliers, but we, we command a really good deal when it comes to service and repair work, because we can give them certainty of supply.
And that actually translates into the monthly rental, because it’s a competitive game. We have to compete on price. So there’s a, there’s a lot of wins from a supply chain point of view for someone to, to move to leasing. I would point out that we don’t lease to private individuals. We only lease to GST registered entities.
And if you’re a private individual, it’s, I, I can’t see there’s any advantage over other, forms of ownership.
Into the EV side of things. How’s that? Progressing in your area?
Well, I’ve been at this game far too long, Adrian, but I’ll tell you what, it’s the biggest single change that’s happened since Henry Ford invented the Model T, basically.
So 2017 in our business, we had no EVs. And in fact, we couldn’t even fund them, our funders couldn’t get their heads around these things going to blow up, you know, are they going to last, or are they just a flash in the pan. Since then, there’s been a massive uptick in the in the take up of battery electric vehicles in our fleet and in the market, in the market generally.
So to give you an idea, at any one time, our forward order book for vehicles on order waiting to supply is around 100 million. Half of that would be utes and vans. I’ll just park them to a side for one moment because there’s no really viable battery electric option. So if we look at the other 50%, which is cars and SUVs right now, 30 percent of that 50 percent if you follow my maths are BEVs or PHEVs.
So that’s from 2017 being zero to where we sit now. And you know, if I had a whiteboard, I draw you a graph. It’s just exponential growth with the uptake of BEVs and what’s driving that there’s a number of things driving it if any business mid-size and large typically if you ask them the question what about your CO2 footprint they’re really interested in saving the planet like this isn’t It’s not bulldust anymore.
Like, people have really bought into the fact that if we don’t do something, then, you know, there is no Planet B, as someone really tritely said. So there’s a real commitment from businesses to lower their CO2 footprint. The best way of doing that is getting out of the big you know, four and six cylinder diesels and petrol and getting into BEV.
So a big drive from businesses to move that way. And then as part of that process is just looking at. And we call it fit for purpose. Does someone need a ute to do their job when it turns out, well, they never actually go off road and they never carry anything in the back. They could be in an SUV, for instance, that’s a full blown BEV or a plug in hybrid to do their job.
So there’s a lot of shift in businesses now around. Moving away from petrol and diesel. I mean, we’ve got businesses, like, we’ve got Waka Kotahi as a customer, and they were, you know, government entity and they were obviously given the mandate right at the start to switch to BEV..
And they, they have the government commitment is to be a hundred percent BEV by 2025, where you can. So that’s one example. We’ve got OfficeMax have just shifted out of petrol vehicles into a mix of BEV and plug in hybrids. We’ve got Mainfreight as a customer. Now you can’t get a line or transport truck that works as a BEV, but you all of their all of their management fleets now in BEVs.
We’ve got Ravensdown, fertiliser, where, you know, their guys and girls are out visiting farmers. So, you know, they need something that can travel rough terrain and probably do pretty big k’s. But again, their management team or those that are, you know, traveling closer to home, you know, likewise switching in, into BEV, so there is a massive shift and, just to my right here…
I’ve got a list of our top 50 and every single one of them would be somewhere down that pathway.
Ute Options?
I think the next thing that will happen, like one of the difficulties at the moment, there’s no viable Ute. There’s a couple of options, but there’s really not something that’s going to handle the, rough and tough applications that a lot of utes are put to in New Zealand.
If you think about, I don’t know, the Department of Conservation fleet, not, we don’t have that fleet, but I know, you know, they’re pretty rough stuff. Some of the, the big agribusiness businesses, they do need something that’s a little bit more rugged, but that’ll come. You’ll see that Ford’s just announced a plug in hybrid Ranger.
We know Toyota’s working on a plug in hybrid Hilux and, you know, once they come to market, I think you’ll see the shift. The other thing that’s happening, price is coming down like, you know, the first Tesla that came out that we leased was $170, 000 and it was viewed as a luxury car. Well, now we’re down to some of the new Chinese vehicles coming in on stream of 45 grand and that’s in the space of three or four years.
So imagine if you dial that forward another four or five years, there’ll be a tipping point hit where battery electric will be cheaper to buy than an ICE equivalent. An internal combustion engine equivalent. Yeah, I saw that you got the BYD Dolphin on there on your front website there, on the front page.
Yeah, BYD is an amazing story. Like, who’d heard of BYD? Like, nobody. 20 years ago it didn’t even exist as an organization. And then they made batteries to start with. And then, you know, next minute, here they are producing an awesome motor vehicle. I’ve had the opportunity to drive the product and it’s absolutely beautifully put together.
Sounds like a plug for BYD, but they outsold Tesla last year internationally, you know, around the world. They outsold Tesla, which of course was the ground breaking battery electric vehicle, and it hits the hit the market. And I think Adrian, we’re going to see more coming out of China. There’s been improvements like MG have just brought out the MG4 which is a big step forward from it.
Yeah, I’ve driven that. That was very impressive. Yeah, really impressive. Yeah, well, we’re talking about fit and finish. Well put together. Yeah, yeah, I just got in there. Oh, this is really, this is impressive. Yeah, and goes fast and solid. But yeah, just felt like well, it’s a normal car, I guess.
But yeah, I was really impressed with that. That’s got really good reviews. Everyone that’s reviewed it gives it pretty sort of top, top marks.
Yeah, and in the fleet space, that’s, that’s, that’s the sort of vehicle that appeals for many businesses, not all. Yeah, so that’s, yeah, that’s where the opportunity lies.
I think we’ll see prices coming down, supply becoming more freely available. And we’ve got manufacturers now, as you know, that they’ve actually said we’re going to stop making internal combustion engine vehicles full stop by 2025 or 2030. Yeah. So it is coming back to your question. It’s a massive shift.
We’re just happy to be able to help businesses along the way. And the other thing that happens obviously is every new one we lease three years time, we’re going to be selling that into the market. So mom and dad will be able to go and buy one of those off, off the yard you know, three years old done, I don’t know, 50, 60, 70, 000 Ks.
And you know, so that’ll have a great trickle down effect on the on the Car park generally in New Zealand.
Are businesses still sort of concerned about going into sort of the EV space? Or has it moved on a little?
I reckon it’s moved on, Adrian. I reckon most businesses now have got over.
Oh my god, you know, this is never going to work. How do we charge them? Just that whole range anxiety and all of the other stuff. I think the conversation now that we’re having is around, okay, how do we practically make this work? We’ve got one of the major trading banks we’re working with at the moment.
They’ve made the call that they want to move most of their fleet into BEV. And so your challenge is, you know, people that take the vehicle home at night. Some people own their house, some people rent, some people are flatting, some people are in a high rise apartment, so if you’re going to provide charging infrastructure, it’s not like one stamp, one cookie cut fits everybody and it’s really coming up with a solution using the likes of ChargeNet and, and other public charging facilities, having charging facilities at their premises, you.
And having all of those options, a different mindset. Our own fleet here at work, we’ve moved to BEV and it is a shifted mindset about how you go about your normal week. It’s like you plug your phone in at night, right? Probably the last thing we all do before we go to sleep is plug the phone in and plug it in the morning.
The Journey to Carbon Zero PDF on your website.
Yeah, the five steps to carbon zero. That’s, you know, we pulled it together after some learnings in the early stages of, you know, the sort of things we came across…
Probably the one key thing that came out of that Adrian is at the moment on that list. It’s got number five is engage your staff. What we often say now is number five comes at the front. Number five is actually number one. Engage with your staff early. There’s a business that we’ve we do business with called Electrics, which is a very well-known brand in New Zealand and they are looking to get you.
To migrate to a BEV solution and their approach I think is the right way to go is to get as many bums and seats in the business to try as many different BEVs as possible. And then, you know, you can’t run a business by consensus, but you can certainly get, you know, everyone’s input and land on something.
Everyone says, Hey, this is really cool. I love driving it. You know, that’s the talk in the lunchroom makes it so much easier rather than people resisting it. We learned that in the early stages with one of our customers, we had we had BEVs and plug in, sorry, BEVs and normal ICE vehicles in their pull fleet.
And when these vehicles came back off lease, the BEVs are done next to no K’s. And that’s because we hadn’t actually engaged with the staff, explained, you know, that when you turn this on, you’re not going to hear anything. You’re not going to get electrocuted if you’re driving in the rain or go through a puddle and, you know, all the other things that were in people’s minds.
Yeah, but back to your point, I think it’s moved. It’s moved now to charging. Have we got a vehicle that’s fit for purpose? You know, fleets are even challenging to the point like, do we actually need the fleet size that we’ve got now? Do we need the number of vehicles we’ve got? Sounds, Sort of counter to what I should be selling being in a leasing company But hey, you know Do you need a hundred vehicles or could you get away with 70 because take 30 vehicles out of your fleet?
You’re gonna drop your CO2 footprint hugely. So Kiwi’s days gone by everyone got a company car like you’d made it when you got a company car Right. I’m a manager now and I’ve got a company car. Woohoo, you know, whereas now it’s like Do you actually need a car to do your job or can you? Get to work another way.
You know, be it by train or bus or, public transport or using your own vehicle as an option.
What about the Australian market comparing to, to your New Zealand operations?
Yeah, they’re a bit behind us. I ran our Australian business for three years.
I got, I got to know. Pretty well, but where I’d start asking answering that question, Adrian, is to point out that I think we’re at 85 going on 87 percent from renewable energy for New Zealand electricity supply, which is amazing. So that’s the geothermal hydroelectric Wind power and so forth Australia, I think someone will shoot me if I get this wrong, but I think they’re in the 20s So most of its coming from firing up those good old Coal power stations.
They’re doing a lot of work with, with wind and with solar, especially in South Australia, I understand so there’s that, there’s that situation and then the other is just the tyranny of distance, right? It’s a massive, massive country and long distances compared to New Zealand.
So when you start thinking about infrastructure for charging, they’ve got some challenges, but I think they because I get to see the stats from our Australian business, they’ve come from a standing start behind us to doing the sort of volumes plus our volumes now. And I think it’ll, it’ll absolutely take off.
They’ve got some tax breaks that they’ve put there. There’s no FBT on BEVs in Australia, which is huge. Big, big tax break. So that’s made a big difference to demand as the clean car scheme is done here in New Zealand. But I come back to, I love our story because, you know, our power largely is not coming from coal fired.
And, and, you know, irrespective of which government get in, I know the commitments there to try and lift that, lift that bar up to 90, 95 percent from renewable resources, which is a fantastic story.
What cars are actually being leased at the moment, the EVs? Is there a particular, I know it’s all fit for purpose, as you mentioned, but is there sort of a go to, that people will ask for?
Yeah a number of manufacturers will shoot me for getting this wrong, but I’ll give it my best shot. Hyundai were of course Tesla were first and foremost into the market, and you know, with the Tesla S and the X, and they were. I’ll call them aspirational vehicles in the early days because they were well north of 100 grand to throw and then they’ve come through with the three, which is always going to be the people’s car for one of a better description and the why it’s absolutely bulletproof products beautifully put together and they still hold a commanding position in the market.
And I’ve just come from a meeting this morning where we’re talking about delivery of a number of Teslas. The other, the other importer and distributor that’s done extraordinarily well is an early adopters Hyundai, Hyundai product. You know, you’ve got to have some balls to be bringing in fully blind BEVs, you know, back in 2017, 18, 19, when they’re not.
The uptake wasn’t that great, and I think they’ve done a marvellous job in being sort of at the forefront of rollout of BV technology in New Zealand. And again, it’s absolutely bulletproof product, beautifully put together, and they still hold a very commanding position. Hyundai, then you probably turn your attention to China.
And we just mentioned MG before the BYD boys that that’s really to set the benchmark. I think, as I said, they outsold Tesla last year. High quality product, great price points. So is it today and looking out at our of our sales team? They’re probably in that Hyundai ,BYD MG zone now. No disrespect to the likes of Volkswagen.
I mean, that’s a fabulous product. It’s really just come into the market. I’d say that’s more of an aspirational brand. It’s pretty more mid to high end consumer focus, but it’s beautifully put together. I drove a Golf R for four years. Which is one of the best cars I ever, ever had, and I’ll get in that ID4.
. I mean, we do some exotic stuff for, you know, the senior executives of some businesses, but our stock and trade is what, you know, you typically find a sales reps driving or a tech guy or someone in a, in a sales a sales role Day to day and those are the brands because price point wise they’re value for money.
We talk about whole of life cost modelling and we can demonstrate that over time. Those are, those are the best value for money vehicles.
Over the next 5 years, where are you seeing the EVs? I guess, utes will come into the space.
Yeah, yeah, that’s the piece that’s missing at the moment.
. I think I know it’s a viable option for people that really do need to have a Ute or a van. I mean, let’s talk about vans for a second. So out of Europe. You know, they don’t have you in Europe, you know, we have used for every man who’s dog here and you’re in Europe, they’re in vans, those people that are those tech people or whoever’s driving around the issue is weight, how much weight you need to carry because the BEV vans at the moment because of the weight of the battery, they can’t carry that much.
And they don’t get much range, but that’s going to resolve itself with battery technology. There’s talk of these solid state battery technology coming on stream. I’m not the techo, but what I’ve been told is it’s way lighter. Now that’s going to be a game changer if you’re, if you’re in a van, you’ll be able to carry that weight and you’ll still get a reasonable distance out of the, out of the battery.
And then. Back to that ute space. Yeah, we’re going to see Ford. We’re going to see we’re going to see Toyota come. BYD, they’re threatening to bring a van to the market. Sorry, a ute to the market. That’d be amazing. See what they, they can achieve. Yeah, they’ve got one haven’t they? Because they keep showing sort of photos of it.
And look, one thing about us Kiwis, we are early adopters, right? We’ll have a crack at anything, and I think that’s what’s happened with BEVs, is that we’ve got over the initial reticence or concern. Now people are into it, and I reckon if the product turns up and it can do the job.
We’ll be in boots and all. From our point of view you know, we’re happy to take the risk again. You know, we take the risk as to what one of these is going to be worth in three or four years time. Sometimes we get it wrong. So again, why would you lease? You know, you’re better to lease, you know, leading edge technology.
Lease it, don’t go and buy the damn thing. So let us be worried about what one of these is going to be worth in three or four year’s time. What’s the battery degradation going to do, what’s value and all the other things that keep our risk people awake at night. Yeah, but next five years I reckon we’ll see an absolute massive shift and then from there it’s going to be, you won’t be able to buy an ICE vehicle, you know BV know BEV will be it will cover the entire market, hydrogen, hydrogen maybe for line haul transport, absolutely, and some of the bigger, bigger kit.
I think the consensus is hydrogen will occupy that space, but for light vehicles, passenger light commercials, it’ll be electric.
And maybe just maybe you want to mention your own podcast.
Oh, thanks. Yeah. Old dogs and new tricks, mate. We’ve, we’ve done a couple and you’re getting more used to it as we go, but we’re really just trying to, I guess, share some of our experiences more broadly.
And so we’ve had OfficeMax on Kevin Obern, Managing Director, talking about their experience and shifting, shifting across we had Richard Edwards, of course, the expert car guy and coming up, I’ve, I’ve actually got Warren Wilmot ,who’s the New Zealand Managing Director for BYD. He’s going to tell us about the BYD story.
So that’s coming up next.
Anything else you wanted to mention sort of as a sort of a summary?
Oh, I just come back to my comment that I think if It’s the biggest change, and it sounds like an exaggeration, but since the invention of the Model T, this is the biggest single change that’s happened in the motoring industry, and I think people are still thinking about what the knock on effects are going to be.
I mean, just one little thing, Teslas don’t have a scheduled servicing regime. It actually says if you’re feeling like your car needs to be looked at, bring it in. But otherwise, there’s no scheduled servicing. Brake pads are replaced. Rotors, sorry, at a hundred thousand kilometers. So if you start thinking about the impacts of that, I’m an upholster, it’s first service is at 30, 000 Ks.
So it’s going to change the industry forever. If you think about all of the garages and service and repair places, they actually… They’re not going to be needed with, with BV. And then people are concerned about batteries and what happens at the end of life. The answer is they’ve got to use.
They’ll be parked outside your garage, tied to your solar on your roof for a period of time. And then I saw a report the other day, like 98 percent of these batteries are recyclable. So already, you know, if you see Prius, Priuses, the batteries are being replaced reconditioned and away they go again.
So. I don’t see any downtime, downside. I see this solid state battery is going to be another step change because of that weight effect that it’s going to be lighter. Yeah. So yeah, it’s really, really exciting times and I’m just really happy to be involved with it, Adrian. Yeah, that’s very good. But finish on.
Thanks for your time, Dennis. Cool. No, thanks Adrian.