Johannesburg - Diversified industrials giant Imperial on Thursday announced the launch of a new business division, which aims to boost the automotive company's vehicle sales figures and exposure to South Africa's sizeable fleet market. The operational unit is called Imperial Fleet Management and will be run in partnership with vehicle financier Wesbank. The pair will provide a range of fleet solutions to medium- and large-sized businesses. These include roadside assistance and fleet consulting. Corporates effectively rent the cars from the fleet management company. "We have got to point where we can no longer ignore the fleet market," said Imperial CEO Hubert Brody.

The group estimates 25% to 30% of all cars sold in South Africa are destined for corporate fleets and around half of this these are financed by fleet management companies. At current market figures, this equates to about 160 000 units per year. Imperial aims to capture about 10% of the total fleet management market through the venture. The initiative is in line with Imperial's operating strategy introduced two years ago; it now focuses on managing fleets and logistics, as opposed to actually owning the assets. Imperial Fleet Management's book is estimated to reach a value of R1bn to R2bn in the next few years, based on a critical mass of 10 000 vehicles.

Cheap cars high in popularity
Brody said profits from the unit are expected to start filtering through to the bottom line of the company in the "next couple of years". The company will take advantage of its exposure to cheaper entry-level imported vehicles - distributed through its Associated Motor Holdings (AMH) arm - to populate the fleets. Typical AMH brands include Hyundai, Kia, Tata and Daihatsu. "These vehicle are very suitable for the current economic climate," said Brody

AMH has performed consistently well over the past year, given the attractiveness of lower prices in the depressed economic climate and the price competitiveness brought about by the stronger rand/dollar exchange rate. Wesbank CEO Brian Riley said the venture will allow the financier to achieve a higher profile in fleet financing - an area where the group lacks exposure. Wesbank's previous involvement in fleet financing was a 50% investment in Avis Fleet Services in 1992. The group disinvested from the venture in 2005.