Top Manager in Discussion: Wolfgang Bartesch of Fox Autorent
Local expat businessman Wolfgang Bartesch relates his experience on the ground through the global economic crisis over the last couple of years.
Wolfgang, is the crisis over?
I think the economy is going in a positive direction. So we feel that we have a higher demand for car rental this year compared to last year, and last year itself was not bad. For us the crisis has two influences. The one influence is the car rental market itself. There is a high demand which shows me that the economy is starting to move ahead and that tourists are coming back to Hungary. This part of our business we are very satisfied with. In the other part of our business there is still a crisis – and this is a crisis for a lot of entrepreneurs in Hungary and also industry – and that is the financing situation here. It is still very hard for smaller and middle-sized companies to get the financing that they need. Of course this is our problem as well; due to the fact that the car rental business demands a high level of finance, we depend on the banks.
What are the problems with the banks? How is business being done today as opposed to pre-crisis?
The problem with the banks is that they are extremely cautious now. They are not only careful; they are hardly financing car rental companies. Also the old partners from the old times that we had are still not active on the car rental market. It is not only Fox Autorent that has this problem; it is the same problem for all of our colleagues.
Can you offer us any insights regarding tourism? If I look at the figures for the hotels, overall tourist numbers are up a little, but revenue is still lagging behind when you see the Revenue Per Available Room (REVPAR). Are you finding the same, that people are renting less expensive cars, or for shorter periods?
Tourism changed at the beginning of the crisis. If you go to the four- and five-star hotels you will find far more bus groups in the hotels than individual travellers than in the years before 2008. That shows that you have more low-budget and economy travellers than individual travellers coming to Hungary, those who were having a look at Budapest, looking around the country and spending more money than the tourists do today. It changed.
What about long-term car rentals or leases? Was it seen as a bit of a luxury and was it hit hard?
In today’s time when the financing situation is as difficult as it is – not only for us but also for other businesses – the long-term rental becomes more and more important. Because companies have a need for long-term solutions and they do not find the financing that is fitting for them, then there is another option and that is the long-term rental. And this is something that is continuously increasing.
Where do you think the economy is going? Do you think it is going to pick up?
I would definitely say yes; if you see what is going on in Western Europe, especially in Germany as the Hungarian economy is dependent upon the German economy. Hungarian industries are suppliers for the car manufacturers and as long as the big car manufacturers in Germany, but also those in Hungary, like Audi, Opel, Suzuki and Mercedes is starting their production soon, as long as those industries are running in Hungary there is a big development. That is no question. But this is one sector and of course this sector brings a lot of business to Hungary but that is not the be all and end all for the economy.
So are you seeing the light at the end of the tunnel?
Even though we had a very hard financing situation, we were able to go through the turnaround this last year in 2010: Now we could order 63 brand-new Opels, found the financing for them and with these new cars we are convinced that we will still stay with our quality reputation on the car rental market as we did in previous times. Our problem is that unfortunately our fleet is getting older and older. It is hard for us to take. But with the 63 cars that we could buy up to now this year – and there will be another 10 or 20 that we are going to buy – at least 20-30 per cent of the fleet is going to change. And if we can do the same step next year, then we have already more than half of the fleet with new cars. The year is not out, but it looks like after three years of crisis we are able to go back to the way of work, to the quality, that we delivered to the customers that they expected from us before the crisis as well. This is a catch 22. We cannot sell our old cars because we need a certain number of cars to serve our clients, but due to the fact that we cannot get enough financing to change the whole fleet, part of the fleet we have to service with two- and partly three-year-old cars.
But this would be the same across the board.
Of course. Everyone is cooking with water and all the competitors have the same problem. I think there are not so many car rental companies who are able to order 60 new cars this year. Opel was in the past by far the most active brand serving car rental companies. When I talked to them the last time in spring they told me it was by far the biggest order they got from car rental companies this year. It shows where we are. It is definitely not a question of having business or not, it is a question of the very restricted behaviour of the banks.
Why do you think they are acting in this way?
In the past they burnt their hands with not only car rental but with the whole car industry. Before 2008 almost everybody was financing his fleet in Swiss francs. Everybody knows the problems that we had in this country with the foreign currency financing. Unfortunately they just locked the door and they are not ready to start the business again.
Are you getting financing from banks or are there other alternatives?
No, there are no other alternatives to getting financing from banks.
There is nothing else you could do like going through a leasing company outside the country or Opel’s own financing?
No. We have to solve this in Hungary because our business model is buying the cars with a certain discount and running them – in the past for six months, but now more often 12 months – and giving them back to the dealers through a buyback contract that we signed at the beginning. This circle would not work if I had the financing from outside the country because banks abroad cannot use Hungarian securities like the title of the car. They are also not close to the Hungarian dealerships, so that raises the problem of them being asked to assess a dealership – which they don’t know – that is signing the buyback. Here in Hungary of course car financing companies and the dealers know which buyback they can accept or not. So we have to solve this within the country.
So you would not get cars from a country where taxes are lower? It is amazing the number of “Slovaks” – with new expensive cars – that have become resident here in the past few years.
There are one or two competitors that are using Slovakian-plate cars or German-plate cars but for the whole fleet that is no solution and we are definitely not doing that. They try to avoid some taxes – especially the registration tax – and gain a competitive advantage, but for us this kind of behaviour is not an option. Also there are multinational companies – and I have heard it from a few of them – that are not willing to get cars from car rental companies with German or Slovakian plates because it makes them look bad. They do not want people to think that they are somehow tax cheats. I think that in Hungary a car has a far higher prestige and image value than, for example, in Western Europe. The foreign plate transports with it the image of a “tax avoider” or worse. It is all over the news. I can understand why a corporate client would not appreciate this negative association. Of course a tourist in Hungary for a week or two would not care or even know. But it is not the way we want to do business.
