Europcar - Further on VW exposure

All, 

Further to our earlier note on Europcar, VW’s exposure may be for only 50% of the fleet. However, we disagree with certain analyst estimates that Europcar is too small for VW to make a difference. Europcar manage a fleet of s300k cars. If 50% of those are VWs and they turn over every 8 months, then the company must be (in one accounting way or another) the destination for 190k VW cars p.a., or 3% of annual production. In an environment where OEMs plan on losing 10% of revenue, we think that 3% matter. 

Not that VW could not replace some of the demand if Europcar failed, but the company’s over-exposure would be gone and along with that certain sales it makes as a result of its cars’ visibility via Europcar. So perhaps the net damage would only be -2% turnover. For an OEM that is still a number worth fighting for. 

Also, in the short term Europcar may have to decide how to re-shape its fleet on lower turnover. VW could gain ~1% of revenue if Europcar decided to purchase more VWs and sell down more other cars.

Again, the previously mentioned contingent liabilities still apply as well, as does a certain strategic rationale for network synergies as shared ownership, easy credit and electric vehicles are on the agenda.

Wolfgang