Leader talks: Aures Holdings CFO Vasant Mistry on the future of Czech car ownership

New car prices are rising dramatically, and are expected to continue to do so. There are alternatives though, that many people may want to consider such as buying a used car or leasing.

The latter has an increasing appeal for millennials and Gen Z, who are moving away from car ownership and all the hassles that comes with it.

Vasant Mistry, CFO and board member at Aures Holdings, discusses the current trends in the car market. Aures Holdings encompasses AAA Auto, which is the largest used car dealer in Central Europe, as well as Mototechna, which sells and leases nearly new cars and premium cars, and the Auto Diskont brand for accessibly-priced vehicles.

In Western Europe, the group recently launched Driverama, an e-commerce platform for buying and selling pre-owned cars. Their umbrella also covers Aures Apps, which provides proprietary software for firms in the auto sector.

Together, the companies provide a wide range of ancillary services including car rental, credit, and insurance services to customers.  

With an impressive career as a leader at Avis, Hertz, and other global brands, what brought you to the Czech Republic, and why Aures Holdings?

Back in November 2020, I was seriously enjoying peaceful stay-at-home life and sitting on my balcony in London when a call comes from [headhunting firm] EIM asking if I would be interested in being the Chief Financial Officer (CFO) and having a management board role in Central and Eastern Europe for the biggest independent car dealer backed by private equity. The opportunity was unmissable. It ticked off all three points that I would have wanted, so the process went fast, By Dec. 7 [2020] I was on board!

On the lighter side, my first visit to Prague was in 1989, and I do recall visiting Charles Bridge. Maybe I am just paying the price for touching the plaque on the statue of St. John Nepomuk, and following the legend to return.

You spent a significant part of your career in car leasing and rentals. How do different countries approach leasing and rentals – for instance in the real estate industry it's well known that Germans like to rent while Czechs prefer to buy. What can you say from your international experiences about trends in these areas?

Car rental is widely used by business and leisure travelers across Europe. Thanks to the boom of low-cost airlines and affordable travel growth, the leisure side accelerated over the decades. Leasing is different. It is predominantly business-oriented. However, private individual leasing has grown and will continue to grow due to a trend to not own a car. People want to avoid all the hangover that goes with owning a car.

With rental and leasing, you have your car and simply drive off, with all-inclusive insurance, repairs, and road assistance, and you can choose. You have the assurance of a replacement car in a few hours. So modern-day millennials and emerging Gen Z members are attracted to car-sharing, rental, and leasing more than ownership.

Another interesting product coming to the market is the so-called subscription service. We shall be looking into this trend and may in near future offer this product. All of these are less capital intensive, hassle-free, tech-savvy, and flexible. So over the coming years, these trends will proliferate in Czech markets as they require a fraction of capital.

Did the communist legacy impact how used cars and how cars, in general, are sold today? I have heard some real horror stories. How has the market evolved?

In my experience, the market evolves. What was then is no longer now. Human nature is designed to remember negative experiences more than pleasant ones. We fail to notice changes. The regulatory environment today, with the emergence of e-commerce, is more protective than ever of consumer rights. Companies have a much larger reputation risk with social media channels. As a result, the focus now is more on product quality and customer service.

We at Aures undertake extensive testing of each car. We do not just buy ANY car. We have also attractive insurance products for peace of mind that cover mechanical or other failures for a period of time for a small price. Where Aures excels is the choice of models it offers, supported by mileage and other conditions, which are guaranteed.

For me, AAA is the highest rating one can get from an investment point of view. Similarly, our brand AAA Auto resonates with quality, and we try harder to uphold our brand values.

Within the EU there is a level of universal regulations and protection afforded by law when one buys a car. Each country may have specific conditions but, with the concept of free movement of goods, the standards have to be similar across the EU. For example, in relation to car sales with a focus on reducing the carbon footprint, some countries cannot import or sell certain categories of cars with non-compliant CO2 emissions.

Is medium-term leasing a relatively new concept in the Czech market? Do you have many competitors in this category or are you a disruptor of traditional markets?

Medium-term leasing among the B2B segment is increasing. Czechia is not immune from the environment or from European and global trends. Company car financing through leasing is accessible either from banks or manufacturers' financing arms. Leaseplan, as a European leader, is also probably a leading player. Their website boasts over 30,000 cars in Czechia. 

Every month your company publishes a "Used Car Barometer." What do current stats say about the market in Czechia?

We publish this research monthly. We gather data from the whole market in Central Europe, which are used for our used-car trading purposes. According to this data, the offer on the Czech market has been continually shrinking since the Covid pandemic began. As a result, car prices are climbing by about 15 percent annually.

This also leads to growing imports of older used cars from other EU countries, with significant amounts of cars older than 10 or even 15 years flowing in every month. These cars are highly prone to various manipulations such as odometer tampering, year of manufacture forgery, or problems with the legality of their origin.

What do you predict for the future of fleet management? 

How the market will evolve under the current uncertain time remains to be seen, but research reports I have read suggest the car rental market will not return to its 2019 level until 2024, as it is heavily dependent on leisure traffic. Leasing will continue to grow slowly due to the shift toward non-ownership.

How do you account for sustainability? Are car-sharing schemes your competitor?

We view ourselves as facilitators. We help economies reduce their carbon footprint. How? It is a big question. We are in a circular economy. The EU has set goals for carbon footprint reduction. CEE countries are growing economies in the EU, where we have had well-developed and strong economies for years.

According to the European Automobile Manufacturers Association (ACEA), the average age of vehicles in this region is 14.8 years while that in the rest of the EU is 11.2 years. Older cars have higher carbon emissions than new and better-designed models. Also, cars are not made to last for decades anymore.

In the longer term, the shift towards newer carbon-friendly and EVs needs to happen or else the EU will not meet its carbon footprint goals.

Both new and used cars are getting pricier given the current spike in inflation. Do you anticipate this changing, and what would you advise for consumers who are in the market for a vehicle? What things should they know, and what things should they avoid?

Car prices have soared due to a number of factors including a microchip shortage and postponed demand from Covid restrictions. Mobility will continue to grow. Now since the Russian war in Ukraine has disrupted supplies again, the parts shortage element will not disappear by the end of this year, as had been previously expected.

I think pricing will continue to rise but much more modestly than seen in 2022. There is a tolerance level of price increases among consumers. We do not expect a price correction in the used car market, but we expect to see a preference for more economic models such as smaller size vehicles with lower fuel consumption.

As for advice to the consumer, I would say: select large, well-known dealers who have strong inspection standards; avoid intermediaries; secure extended warranties; read the fine print; and request money-back guarantees for peace of mind. I would also encourage exploring car rental or leasing or subscription options. Mototechna Drive offers all three at least in some form, where you have no residual value risk, a high standard of vehicle, and excellent service with full post-rental support, all hassle-free.

Lastly but perhaps most importantly, what kind of car do you drive?

I am conscious of environmental impact so I drive a Mercedes AMG plugin hybrid. My carbon footprint is almost zero with the low mileage I travel.