Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39916 Filed 04/25/22 Page 1 of 61
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`E,XHIBIT C
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`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39917 Filed 04/25/22 Page 2 of 61
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`Fleet leasing & management in North America I Key enabler for the future of mobility
`
`Preface
`Fleet ma rket envi ron ment
`Key players in the fleet management market
`Select M&A activities of market leaders
`Business model analysis
`Future of Mobility and implications for fleet management
`Conclusion
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`0s
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`06
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`20
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`26
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`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39920 Filed 04/25/22 Page 5 of 61
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`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39921 Filed 04/25/22 Page 6 of 61
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`Fleet leasing & management in North America I Key enabler for the future of mobility
`
`The future of mobility
`rn ay be spelled "fleet"
`
`outsource the management of their vehicle
`fleets to external providers who can lever-
`age economies of scale.
`
`These fleet management companies (FMCs)
`provide financing and driver and vehicle-re-
`lated services to their customers. Typically,
`FMCs have either a dealership or rental
`background.
`
`We hope you enjoy this outline on the
`current market environment for fleet man-
`agers and the strategic relevance offleet
`management ln the future of mobility and a
`world of shared and autonomous fleets.
`
`Sebastian Pfeifle
`Partner I Strategy & Operations
`
`Christopher Ley
`Senior Manager I Strategy & Operations
`
`Florian Tauschek
`Senior Consultant I Strategy & Operations
`
`Philipp Enderle
`Consultant I Strategy & Operations
`
`The way people and goods move about is
`in the midst of a dramatic transformation,
`Powered by converging social and techno-
`logical trends, the extended automotive
`industry is being reshaped into a new
`mobllity ecosystem. The scope and timing
`of the transition remain uncertain, but it
`seems increasingly likely that tomorrow's
`mobility landscape will be shaped by the
`widespread use of shared, autonomous
`vehicles, especially in urban areas.
`
`This creates both tremendous opportu-
`nities and challenges for fleet managers
`in North America* and beyond, Fleet
`operators will likely be called upon to de-
`ploy a range of vehicles matched to users'
`preferences, to deploy their upkeep and
`storage, and to leverage enhanced smart
`routing capabilitles that match supply and
`demand effectlvely. Doing so successfully
`requires today's core capabllities around
`multi-brand procurement, financing and
`full-servlce leasing, as well as holistic con-
`tract and service provider management on
`behalf of the cllent.
`Further, lt also demands the ability to
`execute vehicle tracking to enable real-ttme
`monitoring of the fleet and the ability to set
`up, schedule, and allocate vehicles through-
`out the service area.
`
`For those fleet managers with foresight and
`ambitron, a further opportunity awaits ln
`the future of mobility. Mobility advisors will
`seamlessly connect consumers with shared
`self-driving vehicles, as well as any other
`transport modes desires, thereby providing
`mobility-as-a-service (MaaS) on demand.
`
`Fleet managers can position themselves
`to contend for this valuable position, but
`they are likely to face stiff competition from
`ride-hailing provlders, telematics providers,
`and tech giants.
`In addition, OEMs and their Captives enter
`this business to keep control ofthe vehi-
`cles, customers, and the data generated
`by these.
`
`Today, North American companies and
`government entities rely heavily on thelr
`corporate vehicle fleets. One of the most
`obvious ones is the sheer land mass of the
`northern part of the American continent,
`which results in more than one million cars
`being sold to corporate clients annually.
`
`Contrary to Europe's strong user-chooser
`market (see Deloitte's previous study on
`the European fleet leasing and manage-
`ment market), the corporate fleet segment
`in North America is predominantly driven
`by functional vehicle fleets, While entitle-
`ment to a company car ls a common part
`of compensatlon schemes in Europe, North
`American employees tend to be given
`access to a company vehicle only if they
`need it to get their job done. As a result,
`the overall cost ofthese fleets can account
`for a significant part of corporate costs. De-
`pending on the industry, these can amount
`to nearly 20 percent oftotal operating cost.
`
`Therefore, a key focus area for fleet man-
`agement in North America is on operation
`al effectiveness and reducing the overall
`cost ofthese corporate fleets. To achieve
`these goals, more and more companies
`
`.This study focuses on the markets in the United States and Canada
`
`05
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`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39922 Filed 04/25/22 Page 7 of 61
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`Fleet m arket
`envlronment
`
`O
`
`The North American fleet market is
`dominated by functional vehicles. Fleet
`vehicles are key enablers for employees
`to fulfil business tasks on behalf of the
`company.
`
`I
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`cl
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`l
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`f
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`Fleet leasing & management in North America I Key enabler for the future of mobility
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`I
`
`C]
`
`&
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`@
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`e
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`i
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`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39924 Filed 04/25/22 Page 9 of 61
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`Growth in the fleet market has mirrored
`that of the total North American vehicle
`market for the past eiSht years and ls
`projected to grow at a compound annual
`growth rate of3.5 percent until 2020.
`
`Historically, companies owned their com-
`pany vehicles and managed their fleets
`in-house. ln recent years, more companies
`have shifted their fleet strategies towards
`financing and leasing rather than purchas-
`ing vehicles to reduce their working capital
`
`The North American market for new
`vehicles is characterized by two major
`customer segments: private and corporate
`customers (including registrations for
`governments). ln2016, about 20 percent
`of new light vehicle sales (see Figure 3)
`were registered to corporates. The average
`fleet vehicle portfolio has a high focus on
`pickups and SUVs.
`
`Compared to Europe, where 59 percent
`of registrations are aligned to corporate
`customers, the corporate channel in North
`America is relatively small with 18 percent
`or 3.6 million vehicles (see FiSure 1).
`
`Out ofthose, about two thlrds of new
`vehicles are registered to the rental car
`channel, leavlng 1.3 million vehicles in the
`fleet market, including company and gov-
`ernment fleets.
`
`Fig. 1 - New light vehicle registrations 2016 for North America (USA & Canada)
`and Europe (EUl6) in millions
`
`19.5
`
`15.0
`
`EU16
`
`41Vo
`Re,tail
`
`59o/o
`Corporate
`
`8290
`Retail
`
`15.9
`
`'tBvo
`Corporate
`
`3.6
`
`North America
`
`gt
`
`source: Deloitte Analysis, wardsauto (2016)1, LMC (20'16), Dataforce (2016)
`
`08
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`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39925 Filed 04/25/22 Page 10 of 61
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`Fleet leasing & management in North America I Key enabler for the future of mobility
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`2016: Record year for North
`American new light vehicle
`registrations
`
`Fig. 2 - Breakdown of new vehicle registrations for North America (USA and Canada)
`
`2.26 million
`
`Rental cars
`
`0.24 million
`
`Government
`
`1.07 million
`
`Company fleets
`
`4.60 million
`
`Consumer leasing
`
`11.30 million
`cash and credit purchase
`
`1'.i%
`
`1Vo
`
`6%
`
`AVo
`
`58%
`
`19.47
`million
`
`3.57 million
`New corporate registrations
`
`18%
`
`Light vehicle
`registrations
`
`82Vo
`
`15.90 million
`New retail registrations
`
`Light vehicles include cars
`and 1 -2 class trucks
`
`Sourcet Deloitte Analysis, Frost & Sullivan (20'14),, Auto-News Sales Report, Ll\4C (2016), Leaselvlarket Report 2016, Automotive-Fleet
`Canada (201 5) r, DesRosiers (2015)"
`
`When looking at the geographical allocation
`of fleet sales, California, Texas, Florida, and
`the North East have the highest concentra-
`tion offleet customers and therefore fleet
`sales. ln Canada, Ontario, Quebec, and
`Alberta show the highest amount of new
`registrations.
`
`In North Amerlca, 2016 was a record year
`ln terms of vehicle sales numbers, with
`19.5 million vehlcles sold, Of these, almost
`125 million new reSjstrations in the US
`and 1.95 million in Canada.
`Flgure 2 shows a breakdown ofthese sales
`by sales channels. The North American
`market is characterized by a large private
`retail share of827o.
`
`New commercial fl eet registrations within
`the corporate channel account for roughly
`670 of all light vehicle registrations.
`
`09
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`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39926 Filed 04/25/22 Page 11 of 61
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`Car segment underrepresented in
`North American company fleets
`
`Fig.3 - North American vehicle segmentation
`
`Light Vehicles
`
`Class 3-8
`Trucks
`
`Class 1-2
`Trucks
`
`Cars
`
`o
`
`Cars
`
`Light Trucks
`
`Medium and Heavy Trucks
`
`Cars include compact, mid-size
`and full-size cars
`
`Class 1-2 trucks include SUVs,
`CUVs, vans and pickup trucks
`
`Class 3-8 trucks include Iarge
`pickup trucks, medium and heavY
`duty trucks and busses
`
`Source: Delortte Analysis
`
`Fig. 4 - Share of vehicle segments for total sales and fleet sales in North America
`
`14Vo
`
`380k
`
`Cars
`
`Light Trucks
`
`Medium & HeavyTrucks
`
`20k
`
`24%
`
`I Total sales I Fleet sales
`
`Source: Deloitte Analysis, polk/lHS (201 6), Element Company Report (201 4),5 Standard & Poors ARI Rating (20'1 5)6
`
`10
`
`600
`
`62%
`
`Fleet numbers based on po(folio split of the
`two largest No(h American fleet managers
`who account for >50% of Norlh American
`combined fleet portfolio (Element & ARI)
`
`

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`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39927 Filed 04/25/22 Page 12 of 61
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`Fleet leasint & management in North America I Key enabler for the future of mobility
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`North American fleet market is
`dominated by functional vehicles
`
`The North American company fleet mar-
`ket's approach is simple: You only get a
`company car if you need it to get your job
`done. lf a vehicle is an essential tool for the
`employee to carry out their job, the vehicle
`is most likely provided by the company.
`Functional vehicles vary from sedan cars
`for sales employees to up-fitted pickups
`and vans for craftsmen.
`
`A minority of companies offer company
`cars as a benefit to employees. These perk
`recipients are typically executive managers.
`
`By contrast, the commercialfleet environ-
`ment is significantly different in most
`European markets which are dominated
`by a user-chooser car policy. Often inter-
`national companies with European head-
`quarters offer company cars as a benefit to
`harmonize employee compensation.
`
`As companyvehicles in North Amerlca are
`predominantly used as functional vehicles,
`it isn't surprising that trucks account
`for nearly two thirds of the fleet sector;
`likewise, the 14 percent of fleet sales attrib-
`uted to cars (fiSure 3).
`
`The differences between the European and
`North American company fleet markets
`becomes apparent when comparing which
`vehicles sellthe most in each market. Whlle
`in Europe, the VW Golf is the leading fleet
`vehicle, the Ford F Series pickup domlnates
`the North America market. Interestingly,
`there is no vehicle that can be found in the
`top flve ofboth European and North Ameri'
`can company fleet lists.T
`
`Fig. 5 - Distribution of perk versus functional company vehicles in North America
`
`900/o
`
`of corporate fleet vehicles are
`fu nctional company cars
`
`\y
`
`Functional company vehicle
`
`Source: Deloitte Analysis
`
`o
`
`\7
`
`Perk - executive companY vehicle
`
`1'l
`
`

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`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39928 Filed 04/25/22 Page 13 of 61
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`Fig. 5 - Overview of fleet market in North America (US and Canada) compared to other major fleet markets in Americas
`
`Country Newfleet registrations 2015 (in thousands)
`
`Share of fleet in total new
`registrations 2015
`
`9't0
`
`5o/o
`
`Bo/o
`
`6-Bo/o
`
`150/o
`
`7o/o
`
`^fl-m-
`
`:=
`
`USA
`
`Canada
`
`(*)I-
`OF
`
`Brazil
`
`50I
`
`Mexico
`
`^-,*
`
`-A
`
`rgentina
`
`12
`
`

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`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39929 Filed 04/25/22 Page 14 of 61
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`Fleet leasing & management in North America I Key enabler for the future of mobility
`
`Description
`
`Key market facts
`
`. Total number of new fleet vehicle registrations is expected to increase
`by 3.5% (CAGR) until 2020'?
`. After hittinga record year in 2016, lightvehicle salesare expected
`to remain stable until 2020
`. Expected annual GDPgrowth rates between 1.0-2 0 percentuntil
`2020e
`
`. No user-chooser market
`. Vehicle selection heavily based on price and discounts -
`brand preferences not as important as in Europe
`. Us fleet market dominated by domestic brands (GM, Ford, and
`Chrysler, with a combined market share of 60 percent)
`
`. Total number of new fleet vehicle registrations is expected to increase
`by 2 percent (CAGR) until 2020
`. After hittinga record year in 2016, lightvehicle sales are expected
`to be stable until 2020
`. Expected annual GDP growth rates between '1.8-2 0 percent until
`20208
`
`. No user-chooser market
`. vehicle selection heavily based on price and discounts -
`brand preferences not as important as in Europe
`. Canadian fleet marketdominated byUSandAsian brands
`. Large pickups represent more than 40 percent of canadian
`fleet market
`
`. Due to fragmented market, fleet market size can only be estimated
`roughlye
`. Total number of new vehicle registrations is expected to increase
`to 3.5N/ by 202010
`. Expected annual GDP growth rates between 0.2-2 0 percent until
`20208
`
`. Although overall automotive sales in Mexico grew by more than
`19 percent in 2016, the fleet industry had a lower growth rate of
`just under 8 percentl2
`. Vehicle sales in Mexico increased by 19 percent in 2016to a record
`slightly above 1.6|vl light vehiclesl'?
`. Expected annual GDP growth rates between 1.7-2 7 percent until 20206
`
`. Argentina still suffers from the effects of many years of economic
`isolation, which explains the virtual absence of lease and fleet
`management offers in the countryr3
`. While Argentina hasthe second-highest number of fleetvehicles in
`South America and despite having made some progress, the country still
`has a very immature fleet management market
`. Expected annual GDP growth rates between 2.2-3.0 percent until 20208
`
`. Thefleet and lease market in Brazil isveryfragmented
`. Thefive largest companies control tessthan 25 percent of thetotal
`market; balance is spread over more than 2000 smaller fleet man-
`agement companiesll
`. Local organizations compete on a levelwith large multinationals
`
`. Vehicle sales have been stimulated by automaker financing with
`low interest rates and aggressive retail pricing from new players in
`the Mexican marketl2
`
`. Large multinational companies are the primary fleet marketl4
`. Local corporations usually purchase their fleet vehicles rather
`than lease them13
`. ALD and the Element-Arval Alliance have local partnerships
`(Autocorp and RDA Renting), however no international fleet
`management company has its own footprint in Argentinal3
`
`13
`
`

`

`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39930 Filed 04/25/22 Page 15 of 61
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`Majority of vehicles
`are in large fleets
`
`Flgure 7 illustrates the distribution of US
`fleet vehlcles by fleet size. With 38 percent
`of vehicles, and only 2 percent of the num-
`ber of fleets, the largest segment is those
`fleets wlth 1,000 or more vehicles. These
`include food and beverage companies,
`communlcatlon and network suppliers, and
`construction companies, They can easily
`exceed 10,000 vehicles and tend to rely
`mainly on class 1-6 trucks (for vehicle clas-
`sification, please refer to Fig. 3 on page 6).
`
`By contrast, insurance or pharmaceu-
`tlcal-related businesses tend to have a
`strong focus on cars, vans, and SUVs.
`
`ln North America, the majority of sales are
`initiated by the fleet company's procure-
`ment or fleet management department
`and are driven by practicality. Unlike the
`European market, a keY Person from
`procurement or strategic sourcing usually
`decides which vehlcle is acceptable for
`each class of drivers. The buying criteria pa
`rameters mostly rely on cost optimization
`or total cost-of-ownership simplifl cation.
`ln fact, it is not uncommon for a fleet with
`more than 100 cars to contain the exact
`same make and model.
`
`Fig. 7 - Number of commerciat fleets and fleet vehicles (on the streets) in correlation to fleet size (USA 2016)
`
`Fleet size
`
`Number of fleets
`
`Number of vehicles (light and medium)
`
`3B%
`
`3Aa/o
`
`230/o
`
`1,000+
`
`s00-999
`
`100/o
`
`100-499
`
`240/o
`
`15-99
`
`640/o
`
`Sou rce: Deloitte Analysis, Automotive Fleet (2016)15
`
`14
`
`

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`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39931 Filed 04/25/22 Page 16 of 61
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`Fleet leasing & management in North America I Key enabler for the future of mobility
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`Fig.8 - Share of in-house and outsourced fleet management services in correlation to fleet size (US 2015)
`
`< 500
`vehicles
`
`s00-999
`vehicles
`
`>1,000
`vehicles
`
`I outsourced I ln-house
`
`Source: Deloitte Analysis, AF Research Department (2014)16
`
`Operating costs for fleets are often wlthin
`the top five spending areas for an organiza-
`tion. Companies operating large fleets are
`more likely to outsource their fleet manage-
`ment to external parties.
`
`Fleet management companies not only
`oversee financing and leasing, but also
`manage entire fleets.
`
`With a large number of vehicles under
`management, these companies can offer
`lower prices due to economies of scale
`and strong buying and bargaining power
`with OEMs and other service providers.
`Besides these efflciency-driven rationales,
`fleet customers also value the transfer of
`paperwork and risk responsibility of fleet
`compliance and regulatory requirements
`into the hands ofthe fleet management
`companles, which typically have dedicated
`regulatory and legal departments to assist
`their clients.
`
`For North American fleet management
`companies, two areas of opportunity for
`growth include:
`
`. lncreasing their market penetration by
`conquering existing key accounts from
`their competitors and winning new cus-
`tomers segments such as government
`fleets,
`
`. Encouraging more companies to out-
`source their non-core business offleet
`management
`
`Fu rther outsou rcing
`of fleet management
`services offers
`growth potential.
`
`t)
`
`

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`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39932 Filed 04/25/22 Page 17 of 61
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`Key players
`in the fl eet
`rnanagement
`m arket
`
`North American fleet manage-
`ment companies historically derive
`from car dealer groups and rental
`companies,
`
`O
`
`I
`
`Dealer
`
`16
`
`

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`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39933 Filed 04/25/22 Page 18 of 61
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`Fleet leasing & management in North America I Key enabler for the future of mobility
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`48h
`
`Rental
`
`O
`
`17
`
`

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`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39934 Filed 04/25/22 Page 19 of 61
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`Fig.9 - Key players in the fleet management market
`
`Competitors
`
`NA fleet size as of 2016 Geographic focus Global partnerships
`
`Element
`
`ARI
`
`>1.5M
`
`>1.0M
`
`Enterprise
`Fleet
`Management
`
`> 470k
`
`Lease Plan
`
`Wheels
`
`Donlen
`
`Emkay
`
`>350k
`
`>300k
`
`>300k
`
`>300k
`
`g)
`
`g)
`
`Arval (BNP Paribas Group) - Global
`AVIS Fleet - Africa
`Sumitomo - Asia
`
`Localiza - South America
`Orix - Asia
`
`.G-E
`-
`.G-E
`-
`
`Own globalfootprint,
`partnering with Foss in Canada
`
`G ALD (Soci6t6 G6n6rale) - Global
`
`FleetPartners - Australia
`
`Athlon (Daimler) - EuroPe
`Jim Pattison - Canada
`
`g)
`
`18
`
`Source: Deloitte Analysis, Automotive-Fleet, company websites
`
`€
`

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`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39935 Filed 04/25/22 Page 20 of 61
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`Fleet leasing & management in North America I Key enabler for the future of mobility
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`Market focus by fleet size
`Small (<250), medium (250'750), large (>750)
`
`Lease penetration
`of portfolio*
`
`Most major
`player in
`NA market
`have a global
`footp rint
`through
`pa rtne rsh ips.
`
`I Non-fundeo I Full-serviceleasing(FSL)
`
`Source: Deloitte estimation
`
`19
`
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`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39936 Filed 04/25/22 Page 21 of 61
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`Select M&A activities
`of rn arket leaders
`
`Fig. 10 - Selected acquisitions and partnerships in NA in the last ten years
`Wheels
`
`Emkay
`
`Acquisition
`2005
`EMKAY acquires PHD Leasing
`from Penske Truck Leasing
`
`'-
`
`--
`
`(*)
`
`2006
`
`Element
`
`Foundation
`2007
`Element Financial
`Corporation founded
`
`PartnershiP
`2009
`Partnership with ALD,
`companies remain
`financially independent
`
`Donlen
`
`Acquisition
`201 1
`Acquired by Hertz Global
`holdings - global car rental
`company
`
`?
`201 1
`
`Enterprise
`
`Expansion
`2010
`Opens its first
`location in Canada
`
`20
`
`Source: Deloitte Analysis, Automotive-Fleet, Company Websites
`
`

`

`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39937 Filed 04/25/22 Page 22 of 61
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`Fleet leasing & management in North America I Key enabler for the future of mobility
`
`The last ten years have seen a wave of
`consolidation in the North American fleet
`market, and that movement has led to an
`lndustry dominated by five players: Ele-
`ment, ARl, Enterprise Fleet lManagement,
`LeasePlan, and Wheels combined cover
`more than 90 percent ofthe market.
`
`One example of this fast-paced trend is
`Element Fleet Management. Founded in
`2002 Element managed to become the
`North Amerlcan market leader through
`four major acquisitions in less than ten
`years. The Canada-based company started
`its business providing equipment financing
`
`services. With the acquisition of TLS Fleet
`Management from Scotiabank, Element
`started its fleet financing and management
`business in 2012. Today, it manages >1.5
`million vehicles in North America and is a
`member of the largest global fleet manage-
`ment alliance Element Arval.
`
`Globally, the world of fleet management is
`dominated by alliances.
`
`Besldes ARl, no other North Amercian fleet
`management provider has its own footprint
`in Europe. Daimler's fleet management
`company Athlon partners with Donlen
`(owned by Hertz). The European fleet
`leasing & management giant ALD (owned
`by Soci6t6 G6n6rale) serves the needs of
`their customers in North America with a
`strategic partnership with Wheels.
`
`ARI
`Acquisition
`2013
`Acquired FleetLevel+ and HPI
`Fleet & Mobility in Germany to
`expand European footprint
`
`Element
`
`Acquisition
`2015
`Acquired GE Fleet services in
`the us, #1 in the usA
`
`Element
`
`Acquisition
`2014
`Acquired PHH Arval,
`started us business
`
`201 6
`
`Donlen
`Jim Pattison Lease
`
`Element
`
`Acquisition
`2012+2013
`Acquired TLS Fleet
`[,4anagement and
`GE Fleet Canada,
`#1 in Canada
`
`Partnership
`2014
`Partnership withJim
`Pattinson Lease in
`Canada
`
`Foss
`Lease Plan
`
`Expansion
`2014
`LeasePlan expands in
`North America with
`addition of Canada. Foss
`will operate the business
`
`21
`
`

`

`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39938 Filed 04/25/22 Page 23 of 61
`
`Strategic acquisition to broaden
`business model
`In the last six years, a lot of movement
`could be witnessed in the North American
`fleet management market. ln 2011, the
`rental car company Hertz acquired Donlen.
`This transaction was part of Hertz'growth
`strategy to provide flexible transportation
`programs for corporate and private cus-
`tomers. AccordinS to Hertz management,
`the Hertz network will be used to expand
`its fleet business to Europe and other lnter-
`national markets.lT
`
`Based on its strategic partnership with Eu-
`ropean-based fleet management company
`Athlon (a Daimler AG subsidiary), Donlen
`is able to deliver global coverage in 144
`countries.l8
`
`Fleet management as an
`investment case
`Element Fleet Management started lts
`fleet acquisitions in the Canadian market
`with TLS Fleet Management in 2012 and
`expanded into the US market with the
`acquisltion of PHH Arval in 2014. The
`acquisition of GE's fleet in the US, Mexico,
`and Australia/New Zealand was enabled
`bythe collection of a blind pool in 20'15.
`Element Financial Corp.* was able to raise
`$2,5 billion of equity capital via the sale
`of subscription receipts ($1.85 billionl,
`convertible debentures ($500 million) and
`rate reset preferred shares ($150 million).1'g
`Within four years, Element became the
`market leading fleet manaSement company
`in North America.
`
`After a decade of
`consolidation, a few
`players dominate
`the market.
`
`22
`
`* On october 3, 20'1 6, Element Financial was separated into two independent public
`companies: Element Fleet Management and ECN Capital
`
`

`

`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39939 Filed 04/25/22 Page 24 of 61
`
`Fleet leasing & management in North America I Key enabler for the future of mobility
`
`Fig. 11 - Select M&A activities in the North American fleet market
`
`Year Buyer
`
`Target
`
`Market
`
`Deal value
`($ltll
`
`Total # of
`vehicles
`
`Price per vehicle
`($)
`
`2015 Element GE (US, Mex, ANZ)
`
`2014 Element PHH Arval
`
`2013 Element GE CaPital Canada
`
`2012 Element TLS Fleet Management
`
`2011 Hertz
`
`Donlen
`
`Source: Deloitte analysis, mergermarket.com
`
`US
`
`US
`
`CA
`
`CA
`
`US
`
`6,900
`
`1,400
`
`549
`
`390
`
`947
`
`800,000
`
`8,625
`
`440,000
`
`3,182
`
`60,000
`
`9,150
`
`73,000
`
`E ?L)
`
`144,000
`
`6,576
`
`Fig, 12 - Development of price per contract for select transactions
`
`Average paid per contract in Us$
`1 1,000 -
`10,000 -
`9,000 -
`
`Target Donlen
`
`Acquirer Hertz
`
`o
`
`8,000 -
`7,000 -
`6,000 -
`5,000 -
`
`4000 -
`
`3,000 _
`
`2,000
`
`201 0
`
`2011
`
`2012
`
`2013
`
`Size of bubble represents the volume of contracts (UiO) involved in the transaction
`
`rnt""lT:P*"
`
`LTi;5;;Tt o
`
`GE Capital
`Fleet Servlce
`Target (USA, MEX NZ,AUS)
`
`Acquirer Element
`
`O-^.,.#lrj5:T:T!T::'
`
`O-ff#r11r-"r
`
`2014
`
`2015
`
`2016
`
`23
`
`

`

`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39940 Filed 04/25/22 Page 25 of 61
`
`are Auto
`
`Arval
`
`RDA Renting
`
`Global view Element-Arval
`
`Fig. 13 - Geographical focus of Element'Arval
`
`------ -\\----- --
`Largest
`
`.=3r
`-'-s
`
`Element
`
`Element
`
`Fleet leaslng company worldwide (Element Arval)
`Fleet leasing company in North America (Element only)
`
`3'd Largest
`
`Leasing company in Europe (Arval only)
`
`--- ---
`\ \ ---
`\\\
`
`---
`\ \
`
`@6
`
` partnerships
`in 17 countries
`
`AVIS Fleet - AVIS Budget Group
`Sumitomo Mttsui Auto Service -
`Sumitomo Corporation, Hitachi Capital Corporation
`Windsor Fleet - Windsor Motor Group
`RDA Rentlng
`lvlareauto S.A. - MaresaCorporatlon
`FleetPartner
`
`24
`
`

`

`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39941 Filed 04/25/22 Page 26 of 61
`
`Fleet leasing & management in North America I Key enabler for the future of mobility
`
`>3.3 M
`
`Vehicles under management
`
`Windsor Fleet
`
`'
`
`o-o
`
`-8,100.',,
`
`-5,500 Arval, -2,600 Element
`
`'fft3'l
`
`a)
`
`Sumitomo
`
`Sumitomo
`
`Arval
`
`F \
`
`Arval
`
`II
`
`I AVIS Fleet
`
`AVIS Fleet
`
`AVIS Fleet
`
`\ \
`
`-53o/o
`
`Full Service Leasing
`
`\ \ \ \ \ \ \ \
`
`Element
`
`I
`
`)
`
`Element
`
`-47o/o
`
`Fleet Management (non-funded)
`
`Source: Elementarval.com
`
`25
`
`

`

`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39942 Filed 04/25/22 Page 27 of 61
`
`Rern ar
`
`c
`
`(
`
`I r
`
`ltrlrrlt
`
`o
`
`Business
`rnodel analysi S
`
`Fleet management is evolving into a
`service business to lower operating
`costs for customers.
`
`26
`
`

`

`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39943 Filed 04/25/22 Page 28 of 61
`
`Fleet leasing & management in North America I Key enabler for the future of mobility
`
`llITrTll
`
`llIIII
`
`Purchase
`A
`oDo
`
`;, i --r .* ', | .' :: i"--, .r
`*
`Ll_i
`' . . , i. ; I
`.* t*,.
`i
`
`,,=
`
`o n
`
`k te
`
`l
`
`Iervtce
`r*r Inanilffi
`
`0
`
`I
`
`-O-OO-O-OOOO
`Os-Or
`OrO
`s-O
`O
`
`o
`
`Jb
`
`o
`
`

`

`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39944 Filed 04/25/22 Page 29 of 61
`
`Profitability comparable to EU
`
`Fig. 14 - Selected financial data from leading North American and global fleet management companies (for 2015)
`
`ALD Automotive
`
`EU
`
`> 1,400,000
`
`$M
`
`19,463
`
`3,168
`
`535
`
`779
`
`582
`
`542
`
`2.790/o
`
`17.120/o
`
`o
`
`Footprint
`
`Number of vehicles
`
`Balance Sheet
`
`Total assets
`
`Total eouitv
`
`Income statement
`
`Net interest income
`
`Other income
`
`ODeratine exoenses
`Net income
`
`Key KPI
`
`Return on total assets
`
`Return on eouitv
`
`Element
`
`Americas
`
`> 1.500.000
`
`$M
`
`13,694
`
`2,960
`
`314
`
`382
`
`331
`307*
`
`2.24V0
`
`10.380/o
`
`Lease Plan
`
`Global
`
`> 1,700,000
`
`$M
`
`25,014
`
`3,234
`
`468
`
`1,122
`
`1,060
`447
`
`1.-790/o
`
`13.830/o
`
`Source: Company annual reports (201 7)
`* including business acquisitlon and separation costs, net income fortheyearfrom distributed operations and gain on distribution ofassets, net oftaxes
`
`Comparison of NA and EU fleet market
`
`g)
`
`Key financials
`
`Customer base
`
`Vehicle base
`
`Business model
`
`Market share**
`
`Key financial flgures of the leading players in North America and EU are very similar
`
`Focus on utility and commercial
`
`Focus on user chooser
`
`Focus on trucks
`
`Focus on cars
`
`Focus on open-end lease
`
`Focus on full service leasing
`
`-60k
`
`>300/o
`
`** Share ofcompany fleet registrations within total yearly light vehicle registrations
`
`28
`
`

`

`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39945 Filed 04/25/22 Page 30 of 61
`
`Fleet leasing & management in North America I Key enabler for the future of mobility
`
`Total cost of ownership in North
`America and EU are similar
`
`Fig. 15 - Average total cost of ownership for company vehicles in North America and Europe
`
`go1o2o/o 1o/o
`
`17Vo
`
`2o1o 2Vo
`
`8o/o
`
`11o/o
`
`1
`
`Mo/o
`
`15o/o
`
`41o/o
`
`22%
`
`200h
`
`I Depreciation I Fuel I Repair, maintenance, tire, & road side assistance I lnsurance
`I lnterest I (Road) tax & fees ! Management fee
`
`Source: Global Fleet lnsights (2016),0, LeasePlan (2016)
`
`From a customer perspective, the total cost
`of ownership (TCO) analysis is key to iden-
`tlfying cost saving potentials and reducing
`operating expenses. Figure 14 shows a typ-
`ical TCO split for a fleet vehicle comparing
`North America and Europe. Depreciation
`takes the largest slice over the lifetime of a
`company vehicle. Fuel costs account for 22
`percent of TCO, which is slightly higher than
`in Europe, Other significant costs include in-
`surance-related expenses (17 percent) and
`maintenance, tires, and repair management
`(11 percent). The remaining costs can be
`attributed to interest expenses, additional
`services, and management fees.
`
`Depreciation varies heavilywlth type and
`make of vehicie and should be considered
`carefully. The overall average depreciation
`in the US was around 16 percent in 201 6.
`Cars lost 1B percent, while trucks lost on
`average 1 1 percent 201 6, By comparison,
`in2014 and 2015 full-size vans were very
`popular and had depreciation rates of less
`than 5 percent.
`
`Managing and forecasting the residual
`values (vehicle value at end of lease
`contract) is one ofthe key competencies
`ofa fleet management company.
`
`Today, more companies tend to analyze
`and optimize the total cost of mobility
`(TCM) rather than TCO. While TCO gives a
`cost calculation per vehicle, TCM is calculat-
`ed per mobility user (employee) and takes
`holistic multimodal mobility models into
`account. The TCM calculation considers all
`costs ranging from the vehicle itself and its
`related costs to other mobility options such
`as taxis, flights, car sharing, or rental cars.
`
`29
`
`

`

`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39946 Filed 04/25/22 Page 31 of 61
`
`Open-end lease:
`Residual value risk with customer
`
`,,alLre, tlre cl flererrce lra -q tc il-o settl'.,r1 arrd
`the custorrer neeaj5 ic pta; tlre':iiffetence
`t:c the iieet rlanaget-
`Ccntrar_,, tir tire ELrr'opearT fleet InarKet.
`Ncrtlr Ailrer aarr ausiL-nrer-s ia,,,cr ilre
`ope:r-enil lease anci are ,r,'illirg io raiie tlre
`residual ! crlrle r ik, preccnrinantly lc L.e
`mcre lle r ble i,r ielt-r; of rrrleage.
`
`l'lorth Arler c.rrr ausioitrcrs fa,,,or olten-enci
`lc.:se r-.i.,er clcrsetl-errd least aorttracts (90
`per aent/10 pe: ce rli). irl irrr Olle!'r-errd leaSe
`(also refer reci ic as termllal rental arjlLrst
`meni clause cr TRAf ), the lessee (fleet c,r-s
`tcrler-) bear-s the res cjual r-isl< but rs nrore
`f exible irr terrrs of contract lerrgtlt arrcl
`noe: not r.:rle resirictlorr: on usage and
`rnileage. Ir-r c;,t" ,'," marke[ ,alre evceeds
`iht :qr eeC r esiciual r.,alue (RV) at tire encl ol
`ilre lease, tlre riist!n.rer gets re',,.'arcied btr
`trre fleei mrrncrg,:rTl€nt ccrlparr)/ or can iruy
`tltr: .ieirlcle fo. ilre agreeiJ ilv lf llre actUal
`rlarl<ei ,,alue I es belcv'l tre agr eeo tesioual
`
`30
`
`

`

`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39947 Filed 04/25/22 Page 32 of 61
`
`Fleet leasing & management in North America I Key enabler for the future of mobility
`
`Contractduration: open
`
`Mileage: unlimited
`
`@ @
`
`Fig. 15 - Overview ofopen-end lease
`
`Start of contract
`
`oooo
`
`oo@@
`
`@Vehicre:
`
`@ForecastRV:
`
`End ofcontract
`
`Actual RV of leased car at
`contract end
`
`Customer keeps vehicle
`Customer pays the agreed
`residualvalue to FMC if they
`want to keep vehicle after
`lease
`
`-ffi
`
`o
`
`+o
`
`Customer
`
`FMC
`
`Customer
`
`FMC
`
`Customer returns vehicle
`lfthe customer hands over
`the vehicle to the FMC, the
`difference between agreed
`RV and actual value has to
`be settled
`
`-s
`
`$
`
`+(D
`
`Af,
`
`o
`
`Customer
`
`FMC
`
`Customer
`
`FMC
`
`ffi Loss due to RV decrease (9 Profit due to RV increase
`
`31
`
`

`

`Case 2:12-md-02311-SFC-RSW ECF No. 2205-4, PageID.39948 Filed 04/25/22 Page 33 of