What does the post-Covid leasing industry look like?

This thought leadership page is just a snippet of the full keynote – follow the link at the bottom to read the full article.

Since 2020, we’ve experienced situations we’d never have imagined. This has driven changes in behaviour we wouldn’t have expected, and given us all a greater appreciation of uncertainty, as many of us have carefully studied graphs from modelling groups and epidemiologists to try and make sense of the changing situation.

At Alfa, we were fortunate we had a pandemic plan that we tested in March 2019, and were used to working virtually, as colleagues often had to work together around the world. When we decided to enact that pandemic plan, we had no idea how long we’d be remote working, or the lasting changes to working practices that’d result, but our company culture allowed us to adapt.

The future is still uncertain - whether Covid, inflation/interest rates, or the climate crisis - but uncertainty is not always a bad thing. Although we need to prepare for ongoing uncertainty, that uncertainty also gives an opportunity for differentiation - and therefore competitive advantage - through both culture and technology.

First off, let’s recognise we’re not in a post-Covid world yet, and there’s increasing talk that we might never be.

We’re getting back together at conferences like Leasing Life, and day-to-day restrictions are starting to loosen. But covid is still prevalent across the world, and although omicron generally had less impact than earlier variants, that was helped by vaccines and other public health measures that aren’t universal. As we see case rates increasing again, it’d be premature to assume that another variant couldn’t emerge, which - if more transmissible or dangerous - would cause us to take a step back into the measures of 2020 and 2021.

On top of the uncertainty from pandemics, we know about many other risks. In the past few weeks and months, we’ve - of course - seen Russia invade Ukraine; as well as rapidly rising inflation; Cop26; and updates from the Intergovernmental Panel on Climate Change.

The IPCC’s working group on Impacts, Adaptation and Vulnerability concluded in its recent update that the climate crisis is an unequivocal threat to human well-being. It said: “Any further delay in concerted anticipatory global action on adaptation and mitigation will miss a brief, and rapidly closing, window of opportunity to secure a liveable and sustainable future for all.” 

One of the most significant global actions to help move towards net zero is the ban of internal combustion engine (ICE) - and even the move away from plug-in hybrid-based cars and vans over the next few decades to pure battery electric or fuel-cell vehicles (BEVs and FCEVs).

Scandinavia is particularly driving the trend here, with Norway giving the most ambitious target of 2025, from when it’ll only allow new vehicles to be powered by batteries or fuel cells.

How consumers and businesses will respond to these bans is unclear.

The transition to EVs has slowed recently by the continuing disruption to supply chains, particularly semiconductors - which have meant that 1 in 5 secondhand cars in the UK are now selling for more than their brand-new equivalents. This will have an impact on residual value (RV) modelling, and the finance products that should be offered in a market where used assets can be more in demand than new ones. But what will those RVs look like when new petrol and diesel car sales are banned? How should that risk be managed?

All of this means we’re in a world of increasing uncertainty, and not all of these will provide opportunities: it’s abhorrent to consider looking for commercial advantage when we can see the humanitarian crisis caused by Russia’s invasion of Ukraine.

However, some challenges do provide the environment to innovate through the development of new products, processes, and technologies.

To read the full article detailing my thoughts on the future of asset finance including green opportunities, partnership models and achieving business agility, follow the link below.