Aramis Auto to be listed on the stock exchange and major manoeuvres in the second-hand sector

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The fact that, five years after PSA took a majority stake in the company, Aramis Auto is preparing to go public is symbolic. This indicates the importance for the European automotive industry of the professionalisation of the used car sector. Despite its resounding success, its volumes are still relatively limited and show that the field remains very open and allows a wide variety of players to hope to succeed in this field.

The disproportion between the new and second-hand markets in mature markets is growing and this law seems destined to become more pronounced in the future. This is because vehicles are becoming more reliable and multi-motorization and multi-modality are limiting the annual mileage.
 
The number of vehicles over 15, 20 or 25 years old is constantly increasing and this has led the Ministry of Transport, AAA and others to propose fleet revaluations in 2020 which all converged to underline two facts:
i) the number of private vehicles circulating in France is higher than previously thought and is close to 40 million;
ii) the average age of the fleet was also underestimated since it was essentially vehicles over 15 years old that were ignored; it is now close to 11 years.
 
It is true that with the EPZs and/or the objective of carbon neutrality by 2050, there is a desire to renew the fleet, but given the robustness of the fundamentals on which these trends are based, it is difficult to see how motorists could develop behaviours that reverse them.
 
A very large majority of households rarely buy old vehicles that they keep for a long time because, from their point of view, this is the most reasonable way to manage their car budgets. In fact, in these budgets as in their total budgets, some expenses are unavoidable while others are 'arbitrable': fuel and insurance are major items of expenditure and cannot be eliminated; maintenance and, above all, the acquisition of a new vehicle can, on the other hand, be avoided or at least spaced out.
 
In the future, electrification could perhaps give some latitude by reducing fuel costs and thus allowing a form of transfer from 'use' to 'acquisition' costs. Most likely, households will take advantage of this reduction in the cost of the car to satisfy other needs that are more crucial from their point of view.
 
To do this, they will be able to count on the fact that electric vehicles will, in all likelihood, age even better than internal combustion vehicles. Indeed, the engines are simpler and the complex and fragile pollution control systems do not increase the risk of failure. Vibration phenomena are also of much lesser magnitude.
On this basis, we can anticipate a sharp rise in the average age of electric vehicles. The logical consequence of this would be a sharp drop in the number of vehicles to be registered each year in order to maintain the level of equipment required to meet the mobility needs of the population.
 
In other words, the ability of developed societies to give less and less money to manufacturers and their distribution networks if the latter intended to be content with selling them new vehicles and maintaining them during their few years of ownership would be largely confirmed.
In reverse, this means that other ways of capturing household car spending must be found, as new car purchases were already structurally marginalised and will be even more so in the future. For households, the ratio of new to used purchases in the first four months of 2021 was 1:8.5 (248,000 new passenger cars were purchased by households while 2,109,000 used cars changed hands).
 

The economic situation is certainly special, but the reasons for taking an interest in used cars in order to increase the opportunities to be in contact with motorists and to take money from them are becoming more and more obvious. Manufacturers are becoming increasingly explicit on this subject and Renault has, with its plans for Flins, joined Stellantis, which took a majority stake in Aramis in 2016.

When Aramis was founded in 2001, it positioned itself as a representative and therefore did not consider the automotive dossier in the way we are considering it here. Nevertheless, the second-hand vehicle became the company's main business at the end of the 2000s and it was because this course of action was convincing that PSA took a 70% stake in 2016. In the meantime, in addition to the reputation acquired by the brand and its site, its two directors had, in their own words, "understood that reconditioning was at the heart of value creation in the used car sector" and that "to guarantee the quality of the vehicles and competitive prices, the only solution was to industrialise". 
 
It is on this basis that the group has ensured its growth, first in France and now in Spain, Belgium and the United Kingdom. Aramis has a reconditioning plant at Donzère in the Drôme which processes 12,000 vehicles a year, half of which are bought from private individuals and the other half from rental companies. The treatment applied to the vehicles halves the risk of failure of the vehicles acquired, reducing the rate from 40% to 20%. Another site was opened in 2018 in Madrid.
 
This "used vehicle factory" solution, developed very early on by the Gémy Group, is being adopted by a growing number of operators. In addition to Gémy, Aramis and Renault, we can mention Emil Frey, Dubreuil, Parot and Bodemer. They are all convinced that "the internalisation of second-hand vehicle preparation ensures cost control and reduced turnaround times" and thus makes operations more profitable while providing customers with significant added value.
 
If Aramis' growth and profitability are anything to go by, this is probably a good opportunity for professionals to explore. As our list indicates, however, this "new frontier" is sufficiently attractive to whet the appetites of both manufacturers and distributors.
 
Traditionally, dealers have been the professionals of the used car market and manufacturers have shown relatively little interest in it, tending to see it as a necessary evil rather than an area of opportunity. With the profitability of new car sales waning and workshops becoming increasingly difficult to fill, it is understandable that the distribution groups have no desire to let Aramis, Stellantis or Renault rule the roost in this area either.
 
Although Aramis is doing well, in 2020 the group sold 'only' 67,500 vehicles for a turnover of 830 million euros. The group is targeting €1.25 billion for the current year and a margin rate of between 2.7 and 2.9%. In the longer term, "Aramis anticipates a turnover of more than €3 billion in 2025 and €6 billion by 2030, in particular by continuing its European expansion through acquisitions as well as by the transformation of the market with the advent of electric vehicles, which will create new opportunities.
 
This would correspond to volumes of between 400,000 and 500,000 vehicles. This would certainly be impressive, but given the current and future importance of the used car markets in Europe, this would leave room for many competitors, especially since if the reconditioning plants learn to handle the transition from the first to the second life of vehicles, it will then be necessary to adapt these methods to manage the transition from the second to the third life. 
 
31/05/2021

The weekly column by Bernard Jullien is also on www.autoactu.com.

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