Avis South Africa: SA’s First Integrated Mobility Solution From Avis

For almost half a century, Avis has been a leading car rental business in South Africa. The door was opened to the American brand – originally established in Detroit in 1946 – when, in 1972, Federale Volksbeleggings Bpk (a Sanlam subsidiary) partnered with Avis in a joint venture to bring the brand to South Africa.

For most in the industry, the vying starts at the airport. Globally, car rental is an industry popular thanks to its ability to solve a problem for international travellers. South Africa, home to a normally booming tourism market, seems like a great home for the typical car rental business. More than 15 million international travellers arrived in South Africa in 2019, the majority of which are part of the car rental target audience.

But what happens when one day the industry hits the brakes? The entire market is forced to close, and the movement of people is forced to stop? It’s the reality thanks to the Covid-19 pandemic.

Surely for those at the helm of car rental businesses, the news that the spread of the virus was out of control, and international travel would cease, must have felt like being hit by the proverbial bus.

WELCOME!

But for Ramasela Ganda, CEO at Avis South Africa – the country’s market leader – the timing could not have been worse. After just four days in the job, President Cyril Ramaphosa announced that the country would enter a harsh national lockdown, with all ports of entry closed, and major uncertainty about the length of time restrictions would be in place. Around 60% of the company’s business came from tourism.

Owned by leading industrial company, Barloworld, the Avis Budget Group had to act fast to avoid disaster. Ganda, an experienced business leader, was without doubt thrown in at the deep end.

Fortunately, Avis had started planning a reorganisation of its business units, integrating car rental, leasing, and sales under one banner. The Integrated Mobility Solution – the first of its kind in South Africa – helped the company to adapt quickly to make the most of a challenging situation.

“Within Barloworld, we felt like we were at the epicentre. All the airports were closed and in the month of April, we sold no cars. It has been crazy but also very exciting. I am one of the very few people that says Covid has been horrible but good in a very sad way. There was a lot I had to do very quickly but it did provide opportunities. It’s about embracing a challenge,” Ganda tells Enterprise Africa.

With uncertainty in tourism came the chance to assist in other sectors. Ganda immediately went about putting the large but dormant Avis fleet to use. Survival became the aim of the game and the vastly experienced Chartered Accountant was quick to ensure cost containment. Smaller facilities were closed, vehicles were deployed to deliver groceries and other essential items, and on June 1 liquor deliveries pushed the fleet into overdrive.

“We were very excited,” smiles Ganda, “it gave us hope after trying a lot of different things but we knew we still had a long way to go.”

CHANGING LANES

The decision-making speed, and the ability to turn plans into actions without delay saw Avis quickly take up its regular place in pole position amongst competitors. Agility and a nimble attitude is something rarely found in big business. But in this new normal there has been very little time to waste.

“As Avis, we reacted really fast. Most people were trying to figure out what was going to happen and whether it would last some time or would be a temporary thing. By the time most of them realised there was a new normal, we were very much ahead,” says Ganda.

“Many are now realising and trying to reposition but it has become difficult. It is do or die, and most are only now looking to act.

“There are a number of things that we have done to reposition – de-fleeting at the right time and the right price, and then reinvesting back into the fleet. In September, when we were spending R2 billion buying fleet, others were in a deep Covid mindset; yet to adjust. The market was slow, so we were able to get the new cars from the manufacturers in large numbers. People then started to look at buying and the manufacturers could not fulfil, leaving them stuck with older vehicles. That puts us in a very good position. The agility that we have really helped us to keep going during the tough times,” she explains.  

As the cornerstone of the Southern African operation, Avis South Africa had to take quick decisions on behalf of its regional subsidiaries in markets across sub-Saharan Africa. But with each national government taking a different approach to restrictions, this was an extraordinarily difficult job. From Namibia, Botswana and Mozambique, up through Zambia to Ghana, all markets remain operational for Avis.

“We are a Southern African based company, so we do have a good footprint across the south of Africa. The restrictions were different across each country for both local and international travellers so for each country we had to deal differently. Some had harsh and extensive lockdowns, some had fewer restrictions but still focussed on travel. International travel was the main thing we had to manage, and we had to introduce a local business strategy for each market. How each country’s government reacted and how we were able to reposition our company was the key consideration. It has been a continuous process of repositioning and understanding the market. Every single day we have our finger on the pulse,” confirms Ganda.

Away from international tourism-focussed car rental, longer term leasing and vehicles used for domestic staycations have also needed innovation from Avis. Changes in consumer behaviour and budget have required the company to optimise its fleet and constantly adapt.

“During Covid we had to change the market mix to serve the market that we are currently in. It included offering up a smaller-sized vehicle portfolio within our fleet because people were doing longer-term rentals and they couldn’t afford larger cars thanks to the uncertainty with jobs. Through the transition, as people became scared to fly and flights were closed, families started travelling long distance in South Africa using larger vehicles, specifically SUVs, so we managed to tap that market. SUVs quickly became a strong category for us. We used to offer these vehicles for our international market but we stopped during hard lockdown and we have now started to reacquire SUVs. Vehicle manufacturers have been struggling to meet demand because this is what the new market wants as a result of social distancing on public transport,” explains Ganda.

The SUV market, from a manufacturer point of view, is now seeing continued growth alongside hatchbacks and crossovers, with the traditional strong market segment of sedans facing drastic reduction.

“The beauty of the SUV market is that there have been many manufacturers that have introduced affordable models. We work with all vehicle manufacturers and we can offer brands for the luxury market and the entry level market,” adds Ganda.

For larger vehicles, those in the truck and van segments, Avis continues to hold a strong lease book with a number of major corporate clients taking up the company’s attractive commercial long-term offering. By bringing the new Integrated Mobility Solution, corporate clients will receive a much more streamlined and value adding service from Avis. Currently, the company boasts 265,000 vehicles under management.

“We integrated this strategy from October 1 and it is still very new. Because of the lockdown restricting us, it has been slightly slower, but we have seen great progress, especially in heavy commercial. The go to market strategy has been deployed and we’ve seen uptake out of it. It’s going very well.

“From an operational point of view, they are now fully integrated and that the only thing left is external branding and the legal entity changes – that comes with a big cost. Now, going to the market, we go out as one,” she adds.

“We see a lot of opportunities in the corporate sector on the leasing side rather than the individual customer side. We believe that the individual customer will still present an opportunity in car rental but for leasing we see the future looking good for companies not having assets stuck in their name and rather leasing them, releasing cash to focus on their core business. That is where we see an opportunity – companies are seeing that they do not need to own cars and there is changing legislation in the country that will also provide good growth for the business,” explains Ganda.

“We want to move South Africans towards understanding the value of use rather than the value of ownership. Get us to provide you with the entire thing and you don’t have to worry. We now have a product and a service to meet every category but quality is the same throughout. How I greet an Avis client is exactly the same as how I greet a Budget client,” she adds.

EV IN SA

Looking further into the future, Ramasela Ganda is very optimistic about the opportunities available for Avis. Performing strongly during the most challenging times of all helps to position the business strongly for future growth.

In the fleet business, the company will be at the cutting edge of advancements from manufacturers. As the use of electric vehicles becomes more widespread, Avis will monitor the situation and ensure access is available when the market requires. This obvious, imminent and major shift is more than just new vehicles – it requires infrastructure too.

“It will always be driven by the market requirement, consumer taste, consumer affordability, and market demand,” says Ganda.

“We are very close to our customers, we listen to serve the right market, and we work very closely with vehicle manufacturers to give the particular specification that meets our customer needs. We have spent a lot of time understanding our customer requirements, be it local or international – that is what we do most of the time, understand who our customer is and what their needs are. If we procure without taking their requirements into consideration – what is the financial position, where are they driving, why are they driving – we will not make the right decisions as all requirements are different. Catering for the market through fleet planning is essential.”

In 2020, only 1500 electric cars had been purchased across the entire continent – all in South Africa. Globally, the market is dominated by the EU, China and USA but the pandemic dampened uptake in North America in particular. But in South Africa, there is no government incentive backing the purchase of electric models, like in the EU. BMW’s i3 and the Jaguar I-Pace are currently available in SA, but at the top end of the market in terms of pricing – both upwards of R1 million. Ganda is certain South Africa will embrace the electric vehicle industry when the affordability issue is addressed.

“We have already started to see some brands starting to bring models to South Africa. Our local vehicle regulator recently participated in a show where they discussed electric vehicles. The infrastructure is still something to look at as it is essential that people can charge in the right places. Most of our customers rent cars and travel long distances so we must ensure there is capacity to charge at relevant points. That will be a challenge in the beginning. Over the years it has not been a secret that supply of energy in South Africa has been challenged and that will be a factor in this roll out. We have to make sure we can still move, and load shedding does have an impact. We are positioning ourselves, alongside the OEMs, to make sure when it does come, we can work together to fund the recharge stations in partnership. There are a number of things we are looking at to help bring the cars into the market.

“Our market uptake will always be driven by the cost level. The initial cost of electric vehicles is a problem worldwide, but when it becomes more affordable there will definitely be an uptake in South Africa,” she adds.

STRONG STRUCTURE

At group level, Barloworld released its annual results in May and group CEO Dominic Sewela reports improvement in continuing operations’ revenue and operating profit by 13% and 44% respectively.

He says that the company’s outlook for 2021 remains positive as key markets recover, commodity prices improve, customers increase capital expenditure, and government stimulus spending supports infrastructure projects.

“We expect Covid-19 related restrictions to continue impacting on our operations in the near term, with sporadic lockdowns expected to be implemented to support efforts to curb the spread of the virus. Sales volumes in the consumer segment are expected to benefit from a reduction in economic restrictions that impacted the prior period. The used car market is expected to be strong on the back of the shortage of new cars and anticipated higher prices.”

He adds that they also foresee providing quality services, and not just prices, will continue to be a driving force in the Car Rental and Leasing business.

“While we await the resumption of new normal travel patterns, we will maintain our reduced fixed cost base to ensure an agile organisation in Car Rental and Avis Fleet. Our commitment to our customers will continue while we grow our market share and sustain a lower cost to serve,” says Sewela.

Ganda welcomes support from Barloworld – where she served as an Executive in the Equipment division from 2017 to 2020 – and is confident that the structure will continue to work well in the ever-changing business environment.

“The group structure has worked over the years and continues to work very well,” she says. “Barloworld is a JSE-listed business and so governance becomes very important. As Avis we get very good support from Barloworld and it has been something which has worked very well and we feel very supported. We have group targets that we work towards. We determine the strategy as a group and there is always alignment.”

As Avis continues to accelerate back up to top gear, ongoing change will be constant and a responsive approach to business will be required. Most of all, a clear and deep understanding of the customer will be vital to ensure the company’s industry leading market share position is not jeopardised.

LEADING THE PACK

For Ganda – the first black female CEO within the Barloworld Group – the complicated start to life at Avis will continue. “On my first day, I met my team through Zoom. We had network challenges and no one was on video. I did the entire structuring of the business on Zoom and I never set foot in the office. I don’t know if you can ever truly get to know a new role like that, but that was my entry – all while making significant changes, integrating businesses, and establishing a leadership team.

“Five of the leadership team in Avis are women. They are very powerful and strong – to survive in this environment, you have to have significant strength. It’s been a rollercoaster of a period.

“We will learn to live with the virus and I really believe that we will maintain this position. We have moved away from the car rental market where we compete only on price – that is not sustainable and that has been proven internationally. You have to offer service that gives the customer an experience so they come back; not just because you are cheap,” she adds.

Avis is undoubtedly a leader on the road, consistently moving in the fast lane. 5000 locations in 165 countries are proof of trust placed in the brand. But when times have been tough and economic uncertainty has been the only certainty, Avis has continued to dominate its market. History shows that those leading the industry during the most challenging times are those that thrive when the tide turns.

“International travel will come back. We have a beautiful country for people to explore,” concludes Ganda.