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News Focus

Avis takes a new route

Jean Tilman, VP marketing and sales at Avis Ukraine explained to UBI the peculiarities of the car leasing and hire operation in the Ukranian market, and how they differ from elsewhere

For starters, Avis is primarily known internationally as a car-hire company – but in Ukraine it makes most of its money through leasing. Also unlike elsewhere, the majority of its customers are companies rather than individuals, with the market described as five to ten years behind other European countries with the volume of car hire lower per head of population. But rapid expansion is underway, with Avis forecasting 10-fold growth over the next ten years from 1,700 cars in June 2010 to 17,000 cars – planned to reach 2,000 by the end of this year.

Of the 1,700 cars, 250 are for hire, and

the rest are for leasing – provided as a comprehensive package – and leasing remains 75% of Avis Ukraine’s business along transport services despite these options not being offered by Avis in most countries.

“Just over 90% of Avis’ business in Ukraine

is from international companies and so the recession has only caused a 3% to 4% drop compared to the market overall dropping some 25%,” Tilman told UBI.

During the current downturn Avis extended

its car hire deadlines from three months to a year, which it says helped a lot of companies survive. Tilman also says that the image of car hire has helped bring new segments to the business – aided by high service levels and an extensive network of service stations across Ukraine, a whole technical service package, MOT, extended insurance package that covers not only traffic accidents but also burglary etc – and country-wide branches allowing immediate replacement. While the company is based in Kyiv, it has eight offices throughout the country.

The need for a strong servicing and

replacement offering is exacerbated by the quality of rural roads in Ukraine. Talking about the country’s road infrastructure, Tilman commented that, apart from some motorway projects, the only road development had been in the Kyiv vicinity and up to 10km radius outside. In the regions the roads are much worse with a lot of improvement work needed before Euro 2012, and while there was

maintenance in terms of people working, the materials used for resurfacing often appeared to be of questionable quality.

Avis has recently been winning contracts

from major Ukrainian companies – some 200 cars to be provided to Konti confectionary firm in Dontesk, and it already supplies many multinationals such as Ericsson, Sony and Shell. With so much business being corporate rather than individual customers, customer retention is of prime importance, so dedicated customer service managers are appointed, and customers retained for at least three years. No matter what car is leased or hired – economy or luxury - each gets the same high level of service from their sales manager and service manager says Tilman.

Included in the transport services are

provision of cars with a driver. “Our recruitment of drivers is very strict, requiring extensive experience, trained in languages – with induction training, for example, that they can’t answere the phone when driving, their car is kept in a good condition internally, externally and mechanically, ensuring that they present a good image for the company with a high standard of driving etiquette,” adds Tilman.

With the use of these drivers, Avis has

also extended into high value services such as meeting clients at the airport, taking shopping or on excursions etc, with pricing per kilometre in cities and per hour elsewhere – services providing for filming crews in the country, and via deals with hotels such as

Raddison, Rus Hotel and Spa resorts, events companies and tourist agents.

The divide between luxury and premium is

now 30% premium and 70 % economy, with most growth in the economy segment during the downturn, “People have moved down the scale during the recession,” comments Tilman. It is clearly easier to control costs on economy contracts when the cost of a single high value Mercedes contract is equal to ten lower cost Skoda contracts – with less depreciation, and the fact that there will be fewer premium orders.

Avis puts itself at No 3 in the Ukraine

car hire/leasing market but says it is gaining market share with its sights set on achieving the number two spot over the next year. It says that the recession has hit the market leader hardest, while it has strengthened its position, its offering and service levels. Growth is not just affected by the recession, which Tilman believes is still going down and was far from over. Of greater importance is educating the market as to how leasing works, adding, “Just three years ago no one really understood how insurance worked and why it was necessary.”

A whole package of documents are required

to apply for credit finance to be allowed, with three scenarios of: rejected; accepted or accepted with certain terms and conditions. To a large extent companies are their own credit reference agencies, thus working with major companies reduces credit risk for the leasing sector. UBi

October/November 2010 UkraineBusiness insight 37

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