It is hard to build a leasing business in a country where people don’t like leasing: but that is exactly what Thai ORIX Leasing, ORIX Group’s subsidiary in Thailand, has done – and very successfully too.
To be fair, the prejudice against leasing is mostly centered on vehicles rather than the many other kinds of equipment, which ORIX also offers (see box “Hardware for Hire”). Most Thais want to own their car, not ‘rent’ it, says Ed Sirivallop, the Managing Director of Thai ORIX Leasing: “It is a different mindset; people here regard a car as an asset and as part of their identity, not just an expense in a spreadsheet as in many developed markets.”
Upgrading from a motorcycle to four wheels is still a big deal in Thailand, he adds, and the car -- preferably a pick-up truck that is used to transport people, goods and even livestock at times – is treated almost like a family member.
More than just money
By contrast, corporate customers that have whole fleets to manage are quickly modernizing. And while financing is a basic requirement, the key to winning business is to offer more than just that. Thai ORIX leasing specializes in complete maintenance packages that include ordering and inspecting the vehicle; insurance and maintenance during the term of the lease; dealing with all paperwork; and any potential accidents or breakdowns. All of these costs can be wrapped into a single convenient and predictable monthly payment for the fleet manager customer.
While such arrangements are increasingly standard in advanced economies, they are still unusual in a developing market like Thailand. The reason ORIX is able to provide them is the richness of its data and the sophistication of its software systems. “We model everything’, says Mr. Sirivallop, “from the model/grade down to the mileage and age of individual cars.”
These statistics allow his team not only to predict operating costs during the typical 3-5 year lease term but also to make a realistic estimate of the vehicle’s residual value (RV) when it reverts to them for sale or re-lease. Often, this is where lessors make (or lose) the bulk of their money, so getting the RV right is critical.
Thai ORIX Leasing runs full actuarial exercises using the statistics it has gathered, just like an insurance company would – and is starting to use machine learning tools to constantly refine its models. The result is 96-98% accuracy in forecasting RVs across its portfolio and a steady stream of profits.
Adding extra flavor
Even so, Mr. Sirivallop was left with a nagging feeling that more could be done with all the data ORIX was collecting; that more “flavor” could be added for customers, as he describes it. This prompted the development of dashboards for fleet managers that show at a glance both administrative information, such as when the next payments are due; and real performance statistics, like fuel efficiency and driving violations across their fleet (see illustration).
This is only a beginning. The next iteration will use this data to generate insights. ORIX may soon be able to measure customers’ fuel (in)efficiency and even pinpoint its causes: for example, a chauffeur keeping the engine idling while waiting in a car park. Many cars are used for only part of a day and could potentially be pooled to increase utilization. And rather than forcing all their drivers to undergo (unpopular) refresher courses, corporate customers may be able to use ORIX data to single out their offenders and just focus on these.
While fleet managers appreciate such added value, they still make decisions largely based on price. Therefore, Mr. Sirivallop has shared his data and insights directly with the drivers: educating them on their habits, suggesting improvements, helping them to schedule maintenance and pointing out the location of the nearest – and cheapest for Thai ORIX -- tire shop when they get a flat. All of this should increase stickiness with the actual users of the car, while helping the fleet manager by eliminating routine coordination tasks.
A leasing ‘singularity’
Eventually, predicts Mr. Sirivallop, the statistical models that ORIX is running on its own servers and the interface it is providing to customers will become completely linked. At that point, all data can become shared and artificial intelligence applications will be able to automatically approve maintenance requests, schedule repairs and even predict mileage, utilization rates and total cost of ownership.
This will lead to a seamless experience for customers and potentially finer pricing too as ORIX will be able to optimize its in-house cost base by automating tasks that are currently performed manually. Such efficiencies will also help ORIX to protect its own profitability in what is becoming a more competitive market.
ORIX was actually the first company to set up a leasing business in Thailand more than 40 years ago. Today, with 12,000+ vehicles and a 10% market share, it is the number three operator in what was for many years a stable market producing double digit returns.
Those returns, however, have attracted new entrants, bringing down pricing for everyone and pushing some existing players into the red. Thai ORIX Leasing, with the top-notch credit rating that comes from being part of ORIX Group and the ability to draw on the experience of fellow leasing businesses, from across south-east Asia, Australia and – of course – Japan, is well placed to weather these new dynamics.
In fact, it can continue to innovate and invest while others struggle. It is still the only lessor offering total fleet management in Thailand and, in April 2022, it also became the first to add electric vehicles to its product range. While EVs are still only a small percentage of the market, not least due to recent supply chain shortages, Mr. Sirivallop notes that manufacturers, particularly from China, are starting to offer models that are both attractive and very competitively priced.
For him it is yet more proof that in an ever-changing market in a rapidly evolving economy like Thailand only those prepared to keep innovating will prosper.
Hardware for Hire
From a 2kg laptop to a 200-ton crane, from solar panels to X-ray machines: the equipment leasing division of Thai ORIX leasing offers a wide range of kit to help small and medium-sized enterprises (SMEs), whether they are construction firms or hospitals. Over the past 40-odd years it has signed some 37,000 contracts, helping to finance 70 billion baht ($2.1 billion) of equipment.
In contrast to cars, equipment leasing is a pure asset financing operation, providing Thai companies with an alternative source of capital from traditional bank loans. And price, often measured in mere basis points, is generally the deciding factor.
Not entirely, however, notes Mr. Sirivallop. On this side of the business, ORIX’s ‘customers’ are the equipment providers, for instance Canon and Fuji Xerox for office equipment, and Caterpillar and Hitachi for construction machinery. For their salespeople and franchisees, ORIX provides services that mirror those provided to fleet managers, such as online credit checks that produce a verdict within the hour, and the ability to generate lease agreements and other paperwork via mobile phone or computer.
This allows the equipment providers to win business through speed and efficiency as well as keen pricing. And the most sophisticated of them even use ORIX’s deep knowledge of Thailand’s SME sector to run marketing campaigns and promotions.
