Hello, and welcome to the ALG Q2 and First Half twenty twenty one Results Conference Call. My name is Gal, and I will be your coordinator for today's event. Please note this conference is being recorded and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the presentation. I will now hand you over to your host, Tim Albertson, Chief Executive Officer of ALD, to begin today's conference.
Thank you.
Good morning, ladies and gentlemen, and welcome to this ALD H1 2021 results call. First of all, thank you for your attendance, and I hope you're all in good shape. Before we go to Slide 3 of our presentation, as the pandemic is still creating disturbance, let me give you a few inputs on the environment our industry has been navigating in here in the Q2 of 2021. Despite the pandemic, we feel encouraged to see the economic recovery. We still experienced lockdowns and confinements across most countries in the first half of twenty twenty one.
But I feel comfortable in stating that ALD has learned to live with and operate in this environment, and so far, we have been able to offset the negative effects. The shortage of semiconductors has continued causing delays in delivery of new cars in practically all our markets, a situation that probably will remain a challenge for our new car deliveries at least until the end of 2021. Now let's get back to Slide 3, which is actually full of positive news. Total number of contracts stood at 1,760,000 contracts, stable versus June 2020 and end of March 2021. This does not necessarily sound impressive, but the commercial dynamics are actually strong, and we have the highest order bank ever and a very strong pipeline.
Again, our remarketing activities achieved great results as the used car market were particularly dynamic this quarter. Shil will cover the numbers in more details later, of course. But we sold 169,000 vehicles, which is a record for an H1, and we gained EUR 7.40 per car sold on average. These good results are driven by several factors: a strong performance and activity on our digital ALD car market platforms and a structural shortage of used cars due to missing trade ins and less returned rental cars in the markets. We expect this situation to continue into Q3, and we're actually very positive for the year end in general.
We have continued to deliver strong margin growth, resulting in an improved improvement of our cost income, which decreased to just 49.1%. We are keeping a strong traction on the electrification with 26% of the deliveries in Europe being electric vehicles, which is a strong achievement and strong steps towards our move 2025 electrification targets. And I can proudly announce that H1 twenty twenty one is our ever best results in terms of net income. We have been able to book a net income of EUR 352,000,000. Let's move to Slide 4 and talk a bit about our progress on the Move 2025 strategic plan.
As you might recall, Move 2025 is built on 4 strategic pillars. You see them in the bottom of this slide. H1 saw several strong achievements in line with the plan, and we confirm that we are fully on track with our anticipated progress on the plan. First of all, Schiphol acquisition, a strategic investment into a Belgian start up, marking an acceleration of our strategy in the Mobility as a Service area. This company's ecosystem allows for the management of mobility needs.
It is a great tool for companies and employees to manage their monthly mobility budget. This functionality will be integrated into our existing ALD Move offering. It will also enable us to combine consultancy services for mobility transformations with digital access to multimodel, flexible and responsible mobility solutions, a very interesting acquisition from our side. On the partnership side, we are keeping developing interesting new partnerships and enhancing our existing ones getting closer to our existing partners. Another excellent achievement this quarter we can announce is the entire new electric vehicle digital partnership with Smart in 17 countries in Europe to be launched in 2022.
We have signed another white label partnership with Volvo in Ireland and a very interesting commercial offering in Holland on the 3rd party used car lease via the Stern network in Netherlands, a first of its kind but surely not the last one, and it can be quite a boost to our growth in the Netherlands. 1 of the new segments we have been targeting in the strategic plan is the B2B2E segment. I'm therefore happy to announce that we have entered a cooperation with Corporate Benefits, who are headquartered in Berlin, to provide an international B2B2E Mobility solution. It's live in 5 countries, and we are targeting more openings with that through that channel as well. The opportunity is sizable, targeting a market of 8,000 companies and more than 7,000,000 employees.
Last but not least, we have been rated prime by ISS ESG. ISS ESG is a global recognized provider of sustainable and responsible investment research. ALD holds the top ranked performance on the ECO Efficiency Criteria. Let's move to Slide 5 and talk a bit about the portfolio development. As mentioned earlier, total contracts are stable versus H1 2020 and Q1 2021 at 1,760,000 contracts.
We have a high record we have a record high order bank at the quarter end, which is explained by several factors, with large corporate activity sustained with a certain number of important tenders wins recently. This activity is not reflected into the numbers yet as delivery time for new cars remains long. We have continued to sign new partnerships, which are currently ramping up. And finally, some of our OEM partners are suffering from the microchip shortage, which slows the number of new deliveries, but actually the activity is very good. On ALD Flex, we can tell that it's very successful and now fully deployed in 31 countries.
Our utilization rates are high, and the number of new contracts are growing at good pace. Overall, we are confident that this will allow our funded fleet to grow in 2021. And on top of this, the Banco Sabadell deal will come into our fleet with around 20,000 vehicles during H2. And we anticipate to have a few more M and A opportunities to come through during this year. Hence, we anticipate our funded fleet to grow between 1% to 3% versus 2020.
Let's go to Slide 6. The pandemic has clearly accelerated the transformation to EV mobility. We see a sound and strong demand from our clients, and we are ready to assist them in this quite complicated transition with both consulting products and services. With this breakthrough on the electrification, we are racing towards our 2025 targets. As you can see, the share of EV passenger cars reached 26 percent of deliveries in Europe in H1 twenty twenty one and 23% globally, more than doubling from a year before.
Let me remind you that our 2025 target is actually 30%. Average CO2 emissions of the delivery stands at below 100 gram for the first time at 99 gram versus 116 gram in 2019, representing a nice decrease of 15%. The new partnership with Smart is adding another reference EV player to the ALD offering. And the combined ALD electric offer now, including charging, is available now in 8 countries. And last but not least, it is worth mentioning that our Move 20 25 targets are already in line with the EU Commission Fit for 55 Climate Package.
Let me hand over to Gill now, who will give you who will guide you through the financials.
Thanks, Tim, and good morning, ladies and gentlemen. So let's start with the used car sales activity results for the 1st semester on Slide 8. The strong used car market dynamic that we have enjoyed in Q1 has continued, reaching exceptional and expected levels in Q2. Very strong demand observed on our platforms, resulting in a record high volume of vehicles sold over the semester at 169,000 vehicles. This strong sales volume has obviously had also a positive impact on the used car stock, which stands at a low level as disclosed in our balance sheet, and we have released €7,000,000 of used car stock depreciation in H1, reflecting the positive price evolution.
The new car delivery delay and the low supply of used cars from rental companies car rental companies are continuing to weigh positively on prices with a strong rebound on the margins up to EUR 10.50 in Q2 per vehicle. Our H1 used car sales results turned at a record high level at €125,300,000 with the margin per unit at €740 for the 1st semester. We anticipate the dynamic to continue in Q3, which enables to provide a guidance for the full year of between €600,000 €900,000 €900,000 of margin per used car sold. So the full year results will depend on the Q4 dynamics. So in an optimistic scenario, the top of the range being based on the continuation of the current trend.
The less optimistic scenario, the lower bounce on an improvement of delivery delays of new cars, which could have a negative impact on supply of used cars and hence on prices and margins. But overall, an outstanding performance and I guess a very positive guidance on the used car sales. On Slide 9, this slide explains the underlying dynamic of the business as 2020 2021's operating performance has been impacted by a few one off items. I will start to comment the exceptional items which have impacted both years. So in 20 20, on the left of the slide, you remember that we booked a significant amount of exceptionals, so €30,000,000 of excess depreciation from our fleet evaluation exercise in H1 'twenty.
On top of the €30,000,000 €19,000,000 of used car stock depreciation and €13,000,000 of forward looking provision in the frame of IFRS 9 for the first time, so for a total provisioning of EUR 62,000,000 last year. In 2021, on the right, we are now benefiting from a partial reversal of these exceptional provisions. As anticipated during our Q1 results call, we have performed a new fleet revaluation exercise, which has led us to release EUR 13,000,000 of excess depreciation in H1. And as explained just earlier, we've also released EUR 7,000,000 of used car stock depreciation. On the negative side, we have booked an exceptional tax provision.
Together with the whole leasing industry is disputing the case with the local tax authorities in the country concerned. When you exclude these exceptional elements, you can see the robustness of the business on the used car sales activity, obviously, but also on the margins. The operating expenses have grown by EUR 16,000,000 from a low base in 2020, which was the start of the pandemic. Other factors to be taken into account are, of course, costs related to the strong M and A activities, of which Sabadell and Schipper, which have been announced so far, but also staff bonus payment provisions for 2021 as we are widely exceeding our budget. And our cost of risk stands at a particularly low level, reflecting the low rate of company defaults.
So when we move to Page 10, when we look at the P and L, So leasing contract and services margins are up EUR 55,600,000 and excluding specific provisioning, leasing, contract and services margins taken together grew by EUR 25,700,000, which shows a positive geo effect compared to the fleet growth in volume. Leasing contract margins obviously benefit from the increase in rental asset value, driven by the evolution of our fleet mix towards more EV. The services margin are being negatively impacted this quarter by the exceptional tax provisioning we already mentioned, but also still lower excess mileage billing than we used to. And also volume rebates provisioning from suppliers. However, I want also to comment that the loss the low loss ratio on accidents is not yet fully reflected in the Services margin in H1.
So cost income ratio, excluding the used car sales result, has improved at 49.1% on the back of these sound margins and also positively impacted by the excess depreciation release in the leasing contract margin. An exceptionally low cost of risk, down from previous quarter, and it's worth reminding that all our assumptions on our forward looking provision remained unchanged. Our effective tax rate stands at 21.2%, and we see the impacts of the Tag and Stability Law, which is progressively fading. So this results in the highest H1 net income ever at 52,000,000. So quickly on Page 11 on the balance sheet.
So you can see that the earning assets increased by 3.6%, reflecting the increased share of higher value vehicles, full EV, PHEV in the new deliveries and some FX impact. These trends on the asset value also explain the increase in other assets and other liabilities. Overall, a very strong total equity assets ratio at 16.7% at the end of June 2021, up from 15.6% in June 2020 strong earnings generations compensating for dividend payment in Q2 for €254,000,000 So now let me hand over to Tim, who will present to you the new guidance we have formulated for 2021.
Thank you, Kjell. Yes, I guess in the course of 2021, we have stayed with an outlook due to the visibility. But actually, today, we now feel that we have enough visibility to provide you with a real guidance for the rest of 2021. And as already mentioned, despite the microchip shortage, but thanks to a very strong order bank and based on a good pipeline of M and A deals, we are confident that our funded fleet will grow by 1% to 3% this year. And as Shiel explained, we Kjell explained, we estimate that the dynamics of the used car market should continue until year end, meaning that we should land between €600 to €900 per car sold in 2021.
And as for our cost income, it should continue to improve versus last year. This concludes our presentation. Thank you for listening, and we are now ready for any questions you may have.
And the first question comes from the line of Enrico Bolzoni from Credit Suisse. Please go ahead.
Hi, good morning and congratulations on very strong set of results. Just a couple of questions, just requesting from my end. So one, clearly, Linde's call is very strong. You partially mentioned that is mainly due to the change in the mix within the fleet. With regards to electric vehicle, which clearly is penetration is increasing, should we expect a bit of an offset component in the service component?
So electric vehicle, in theory, if I remember well, you said in the past, might require less servicing, so margin might come a bit soft there. Just wanted to clarify that. The second question I had was on the timing of your agreement with Corporate Benefits. Is this something you expect will start to contribute from this year? Or maybe we really need to wait next year when hopefully the deliveries of new vehicles is going to start?
I know that, for example, corporate scheme, you can join them at specific time horizon in March. And my last question, I mean, clearly, over the past 6 months, there's been a lot of rumors on potential M and A. So I just wanted to ask you, 1, your standard bolt on acquisition, how does the pipeline look there? Is this something substantial we should expect? And second, in terms of much larger consolidation in the industry, if you can give us any update.
And related to that, I wanted to ask you how easy would be for you to possibly pick up a bank's banking life like some of your comments? Thank you very much.
Thank you, Henrico. I hope we got your line was a bit blurred, but I think we got your complement. But I mean overall, what we anticipate is that the margins will be shifting around a bit. It's true that we talk about investments that is clearly higher than what we're used to with ICE cars. So on the financial part, there is normally a benefit from that.
And on the service part, it's true that anticipation is that there will be less service to an EV going forward. But we also know there's other areas, especially like tires and other areas that is actually will be increased in terms of cost and margin overall. And then there is a lot of new services to be developed around the EUV, which we are in the midst of. And the whole charging infrastructure where we're also taking an active part of that is also creating opportunities for new margins. So I would say what we see in the short run, we do not necessarily see a big shift on things.
In, let's say, medium, long term, we probably will see that the specific service margin element in terms of maintenance and repairs might be smaller, but we definitely anticipate to offset that with new services that will be provided. I don't know, Giuliano, if you want to add to that. Yes.
I just want to precise that this semester service margin is mainly based on the lower ex mileage billing and also on the fact that we are basing our provisioning of volume rebates from suppliers on a conservative base because we have no not a clear view on the delivery delays of cars, which puts all these volume rebates potentially at risk. So we want to be on the safe side, and that's also the explanation of the service margin this semester. We can't say that the share of EV on the entire fleet currently has not a significant impact on service margin?
No. And I think if you look, of course, when we talk about electric vehicles today, we talk about 100 percent BEVs and plug in hybrids. And actually, the number of plug in hybrids are still the majority of these cars, even though that the full electric is coming very fast as well. And of course, a plug in hybrid has at least the same service cost and margins as a normalized car. So it's true that on the portfolio today, it's that's not the impact as such.
But going forward, again, the different elements of the service margin might be changing a bit the structure, but we do not necessarily see that we will miss out on service margin overall going forward. And then your question to Corporate Benefits. So it's an agreement that is actually in place in one country and been rolled out to 5 countries now. It takes time to ramp up like anything else. And again, also in terms of delivery times of new cars.
So I don't think we will see a lot from that deal this year as such, but it will be a strong contribution definitely from the start of 2022. And it's a very, very interesting, let's say, partnership because it gives access to all the employees who typically are not eligible for a company car. And therefore, we increase our presence in the corporate sector here quite substantially with this deal. On your last questions on the acquisitions, on the M and A, I mean, on the last part first, we have an established practice not to comment on the rumors, and we haven't changed that as such. So we don't comment on the rumors that has been in the market for a more structural yield.
But as you've seen, we have taken the stake in Skipper, which is clearly different from our Boldon acquisition. So it's a real acquisition based on our Move 2025 strategy. We have a few others in the pipe of that kind to accelerate our Move 2025 and ensure that we are taking real steps ahead to transform our business and remain a real leader in the mobility space when we get to 2025. And at the same time, the bolt on acquisition are as exclusive as they have always been, and we're looking everywhere. And again, we are quite active in this space.
So you might see the typical bolt on acquisitions like you saw with Sabadell, And you will see potentially a few more like Skipper that will enable us to execute our Move 2025 strategy perhaps even a bit faster than anticipated. So I hope that answers your questions in the call.
Sorry, yes, it does, if I may. So the last one was just in terms of banking license, I mean unrelated to M and A and other problems, but is it something you could potentially pick up if you needed just to also maybe diversify funding Or it would be complicated to do so?
It's quite a complicated process to become a regulated entity today. So I mean, unless there's a very good reason to do it, we don't see a need for a banking license today. We have a very strong position in terms of the funding. SocGen is still providing the majority of the funding. We have 30% of the balance sheet funded through bonds and securitization programs.
And unless there is an event that would mean we would need a banking license, there's no real need for us to get one.
The
next question comes from the line of Thierry Vijayarajah from HSBC. Please go ahead.
Yes. Good morning, everyone. Just a couple of questions. So firstly, on your balance sheet, I just wondered how do you think about your current leverage? So if your leverage ratio you show on Slide 11, that's been steadily creeping up now up to 16.7 percent.
So that's up more than 100 bps or so in the last 12 months. So how much scope do you think there is to leverage up your balance sheet, take on more debt? And then secondly, changing gears, actually talking about one of your competitors, I just wondered what your thoughts were on the €400,000,000 equity fundraising that Carnex did back in July. Do you think your equivalent digital used car platform might need that same kind of injection of growth capital to stay in the game? Or would you rather not get into an arms race on the digital marketplace side?
There's obviously some property valuations there and you're better off leaving that chase for 3rd party volumes on the digital marketplace to other players. Just your thoughts on what your competitors are doing there, please? Thank you.
Yes. I'll take the first one. Okay. On the current leverage, very good questions. As we commented earlier, and we have quite a strong pipeline of bolt on acquisitions, which also explains the reason why our OpEx have increased in H1.
We have more cost than really we have announced deals. So and that may worsen this ratio when deals are announced and goodwill are booked. So hopefully, we will come in H2 with new announcements. It's always longer than as we always commented, it's always longer than anticipated. So that's how you should see it.
On the payout ratio, I guess, we'll stick to what we said in our 2025 plan. A dividend payout at least 50%. And based on these current results, you should expect a good return on the share price.
Good. Yes. On the used let's say, digital used car sales platforms, I guess, we have talked upon it several times before, and it's an interesting development. I mean, the way we look at our car market is a natural extension of taking a lot of residual value risk. And for us, it's about mitigating that risk basically to be able to sell our car that comes back.
And what we have seen with Carnext is really embarking on a completely different business model because they basically will be selling 3rd party vehicles, I guess, and become a completely independent, let's say, company to lease plan, if we have understood correctly. And if you take A1, Kaazoo and the others, it's simply you're basically creating a used car sales company, which is different to what we see with car market. And I mean, we could potentially do the same in terms of the digital assets and in terms of the, let's say, the infrastructure that you need to do it, all is there to do it, but it's really embarking on a new business model. And that's not where we are today with car market. We actually see these platforms as quite interesting supplement to the market because all these platforms are now competing for used cars, And it means that the used car prices are being even better, I would say, based on the fact that there is more competition.
And we have actually A1 and others buying cars on car market, and we see them as an interesting part of ensuring the best prices on car market for us for our used cars. So but I mean, it's really around a completely different business model, which we have not decided, at least for now, to do the same as lease plan. But and it's very interesting to see the development. And clearly, there is a market for these digital platforms. But for us, it's an add on to the competition in the market, which is healthy for our used car sales prices.
Great. That's very clear. Thanks, guys. Thank you. Thank
you. The next question comes from the line of Sanjay Baghwani from Bank of America. Please go ahead.
Hi. Thank you very much for taking the question as well. My first one is on the provision. So I mean if we just talk about the excess depreciation provisions and the credit risk provisions. Last year, you provided for something around RMB 55,000,000 and so far of that, you have just released around RMB15,000,000.
So how should we think about the release of the rest of the RMB 14,000,000 given that I mean the uncertainty around the residual value risk and the credit risk is also fading. So how should we think of that?
Yes. Thanks, Sanjay, for the questions. Good question. So as indeed, we'll perform a new evaluation exercise in the second half of the year, which may depending on because of course these exercise are based on historical performance also. So I can't clearly give you a precise answer to your question, but my good feeling would be that we would still have some more reverse sort of this excess depreciation to be taken into H2.
Is it to the extent of the full provisioning of last year? I don't know. But it's true to say that with a used car sales results of €1000 margin in Q2, as I commented in my speech, it's way above our expectations. So it should have a positive impact also in H2. Regarding the credit risk, for the time being, as I commented earlier also, we haven't changed the forward looking assumptions.
So it stays as it is. In fact, there's a slight benefit on the fact that the aging of our receivables have improved. So it's a technical benefit, so to speak. For the time being, we are keen to keep these forward looking provision. We see if credit risk is worsening in the next quarters.
So timing, it remains very low, Q2 being even lower than Q1, trying to provision as conservatively as we can. But we don't see any credit risk really materializing these days. So you I mean, based on I can't see credit risk being negative having a negative trend in immediate next quarters. So that's the answer I can give you. So of course, this is a positive impact on the cost income, which we need to take into account, especially on the excess depreciation.
So short answer to your question, yes, we should see some more reversal in H2.
Thank you. That is very helpful. And when we talk about the used car margins, what I'm trying to understand is how much of this is purely cyclical versus in fact you discussed some structural measures as well in your CMD where you are planning to shift the mix from lower profitable channels to high profitable channels. So how much of this favorable used car margin is driven by those structural measures? Or how is it progressing?
Yes. I think that's it's quite a difficult question to answer, Sanjay. I think what I mean, if you look at the market, it's very clear. It's an exceptional situation basically where the shortage of used cars is evident. And it's driven by the fact that the new car sales or the new cars being sold is very long to be delivered, which means that typically when you sell a new car, there is a trade in coming in there, which is not coming now because of the new cars are delayed.
We saw that, I think, the first half of this year, there's a miss of 4,000,000 cars not being sold for the time being, which, of course, is quite substantial. And that has an immediate impact. These trade ins are typically cars that competes with our cars. And at the same time, the rental business is not at the level it has been in the past before the pandemic. And they also actually would be offloading quite a number of cars throughout the year, which is not happening at the same speed either.
So it's quite exceptional what's going on. I think then there's no doubt that our capacity to actually steer our cars into the right channel, we have retail sales, we have wholesale, We have we are using all the channels also in terms of cross border sales. And we are starting to use some interesting AI on our platforms to ensure that we are measuring, let's say, the markets much more focused than we were in the past. And that potentially also have clearly an impact on the prices we achieve for our cars, but I cannot tell you whether that's accounting for 10% of the additional margins we're getting today or not. That's not really it's very difficult.
It's too volatile, to be frank, on that part. But I mean, we are doing and having a lot of remarketing side to constantly improve the channels and ensure that we put the right car to the right channel and that we find the right cars for the right customers for the cars and that we are constantly pushing also for retail sales to the largest possible extent. So the good results is clearly a very strong market for the time being, but it is also the fact that we are, I think, handling this particular area very professional.
Thank you. That is super helpful. I have one more question, if I may.
Of course.
So my final question is on the residual value. So first to understand how do you think of like at this moment when you model your residual value, what sort of like assumptions are you taking for EVs versus ICE vehicles? And also do you think these residual value assumptions are likely to change in the near future given this fit for 55, which also kind of recommends that sale of new ice cars to be banned from 2,035. So do you see this to drive any change in your residual value assumption policy?
Yes. That's also a very good question, Sanjay, I would say. But let me start and then I think Shiel can complement. So it's true we are sitting in a situation where we normally had a lot of historical data on used car sales. And as we have seen with EVs, that experience is not exactly what we need today.
So we are reorganizing all our teams around electrification, and we are basically highlighting the different areas that will have an impact on the price of EVs going forward. There is a production price that is anticipated to come down. There is subsidies that you would anticipate would disappear over time. There is basically a supply demand situation that typically would look very much like what you actually see today with a very little supply of used EVs when also, let's say, the consumers are start looking for used EVs, which would be positive for the on the EV side. And then of course, there is the technical obsolescence that goes very fast or that it's moving.
So we need to have a handle on all these specific trends. And we have put together basically a spot pricing team on EVs that works on a much more frequent basis than what we have been doing in the past with ICE cars and trying to make sure that we take the right decisions on this. So overall, we have a very different approach to what we have had with the ICE cars. And it's true that the uncertainty in this particular area is, of course, much bigger than what we have been used to. But we feel quite comfortable with where we are today with the pricing.
And on top of that, as we have said many times, we are developing the used car leasing. And it has actually been always with the aim to have the electric vehicles potentially having 3 or 4 turns in our portfolio because it could be that we get a particular technology priced wrongly, which could mean that it might not have an attractive price in the market to sell. But in terms of using the car, it's perfect because it still goes into the 0 emission, let's say, zones in the cities and you can easily drive the car. You might not want to buy it because it might not have the newest technology, but you are happy to lease it for 1 or 2 or 3 years. And that gives us an opportunity to, of course, depreciate that asset down to something that works in a used car market at a bit later stage as well.
So I think we are definitely looking very detailed into the trends. We have consultants from the outside helping us also to model this in a different way that we have been used to with our ICE cars. And then we try to find mitigants if we should be completely wrong with a particular model or particular car that we can actually keep it inside ALD for maybe 6 or 7 years and write off the assets to whatever is needed.
Thank you. And on the residual value policy in on highskars in light of it for 55?
I guess on that, Sanjay, we see that the market as we see today, just to remind you that even today, the vast majority of the cars that we are seeing are selling the used car. We are selling our diesel vehicles that have been put on the road in 2016, 2017. And you can see that we have no issue to sell these cars. And there is no effective pure ban of these cars in a really short time frame. It's not what is envisaged in the 55 plan.
So of course, we are adjusting the RV on combustion engines, but not to the extent that these cars will be banned in a short or medium term. I guess I can only echo what Tim said on the EV. I mean, there will be a lack of supply of EV cars in the market. And I guess, rental companies are not likely to be large buyers of EV for instance. So we'll be we are the one ahead of the leasing industry and market in terms of EV and there will be a strong demand.
So we are that's how we are positioning our RV today.
Thank you, gentlemen. This was very helpful. Thank you very much.
Thank you. Before going to the next question, I would like to remind all participants Thank you. The next question comes from the line of Dominik Edridge from Deutsche Bank. Please go ahead.
Hi, thanks so much for taking questions. Just a couple of fairly quick ones and apologies if I missed this earlier on, but can you just maybe discuss about what happens in the case of car pricing, assuming they go up given all the supply chain and industry issues that are out there? Can you just discuss how you see the current environment on the in the car leasing industry? Do you feel able to pass on any additional cost there? Or do you feel there could be the risk on margins there?
And the second question was just a little bit further on the car pricing. Just given, as I said, all the issues we've got at the moment, how long do you feel what is your working assumptions at the moment in terms of how long it will take, a, for the industry to maybe get back more to bit to normal? And then secondly, on the residual values and the secondhand values, how long it will take that market to get back to normal? Thanks so much.
Right. Yes. So I mean there is a very, let's say, high correlation between new car prices and residual values. So if new car prices goes up through inflation or whatever it could be or that the manufacturers decide to take better margins, Typically, that's very positive for our business and especially for the existing portfolio of cars. Now and typically, we would pass on without problems any kind of increase in car prices to the customers.
So having said that, we are in a very competitive market. But typically, when there is, let's say, general price increases coming on tires or whatever, the industry typically aligns that and push that to the customers. But overall, if car prices comes up, we can push that increase to the customers. And it would typically have quite a positive effect on this residual values on the existing portfolio. Now to the second question on when we anticipate things coming a big factor normal.
I mean, the input we are getting from people who are close to the manufacturers and the manufacturers themselves, manufacturers themselves is not very open about this, but we have a few people who are delivering through the manufacturers, and they give us some inputs. And it looks like actually now there is a bit of, let's say, disturbances again because with this delta variant in Asia, there is several of Southeast Asian countries that is closing down not for long, but maybe for 2 or 3 or 4 weeks, are typically producing microchips and that can have another, let's say, prolongation of this microchip shortage. But overall, it is anticipated that it will slowly come back to normal. The hub will end of 2021, perhaps having a bit of spill into the early part of 2022, but then the problem should be solved. At least that's the anticipation.
It's not anticipated that will be a catch up for the 4000000 to 6000000 cars that will not be produced in 2021. But overall, we go into, let's say, at least probably from late Q1, Q2, 2022, it's anticipated to be back to normal. And I guess at that point, we would eventually see the used car market also coming back to normal because it would mean that the trade ins from the new cars that could be quite massive because there is a lot of, let's say, pent up demand in the markets. So we would then actually see that the used car market would normalize pretty much at the same time as you get back to normal with the new car sales coming back on track.
Thanks. Can I just ask one further question as well? In regard to looking across your portfolio of countries that you operate in, do you notice any sort of major changes in terms of momentum in terms of new business or anything else in the markets between those that reopened up maybe slightly earlier and those that are reopening later at all? Or do you feel it's a case that people have sort of got back to work as normal as it were in terms of looking for sorting out contracts, etcetera, on the and dealing with new business in that regard?
So John Safford is with us here as well. Maybe John, you'll more
take that. Yes. So thank you for the question. I think as Tim said, countries that are still in lockdown, obviously, there's a very slow commercial dynamic because of the uncertainty of when those countries normality is very quick actually because people are keen to get their businesses back up and running as fast as possible. Governments are withdrawing furlough schemes as quickly as they can in order to get people back working and back to the office and back being active as well.
What is clear is everyone's coming out of the crisis considering their mobility plans going forward, and that's why you see this dynamic around electrification in our new registrations. It's why we've moved to accelerate our Mobility as a Service capability because more and more countries are introducing a mobility budget type incentive to replace the default of a company car in some cases or complement it alongside the all of the other employees in the organization as well. So it returns to normal quite quickly, in fact, probably quicker than we would anticipate. But a lot of those customers are asking for help and advice and consulting on how they manage the electrification and the mobility journey. And that's why we're seeing a big demand for our Business Intelligence and Consulting division.
That's why we're very active on the commercial side and in the order bank that we're seeing.
Okay. Thank you very much.
Thank you. There are currently no further questions in the queue. So I will hand the call back to our speakers to apologies. We have now just one another question, and it comes from the line of Geoffroy Michellet from ODDO HF. Please go ahead.
HF. My question has to do with the car deliveries in H1. Could you give us a sense on what is the mix in terms of sales of new car for diesel. You gave us the number in full year 2020. Could you have the mix of diesel vehicles sold in H1 twenty
twenty one? Yes. So as you know, our diesel have basically been coming down very quickly from 80% back in 2017, I guess. And in H1, we are around 30% of deliveries of diesel cars. And as Gilles said, actually what we see in Fit55, we think that the ICE cars will then eventually have a longer phase out time because they will not be banned for driving.
They might be banned for getting into city centers and all that, but they will not be overall banned. It's true they will not be able to buy a new car, which is with an ICE engine, but the cars will be allowed to drive around. So we will potentially still see that a portion of the cars for the next, let's say, 2, 3, 4 years potentially would be diesel. But we are down to 30% of our deliveries, which is basically in deal.
Okay. So an additional one, is it fair to think that EV vehicles could overcome diesel vehicles by year end?
No, I think that's a bit I guess that's probably too ambitious. It's true that as we said initially in the introduction here, our target of BEVs and plug in hybrids is 30% by 2025. And clearly, that target will be over exceeded. And we will eventually look at that target in the coming months of this year. But to get to so you mean the 30% diesel taken over by the year end?
Yes. Yes. Okay. But still, I guess, we would not anticipate that. But it's true that between diesel and EVs, we are probably quite on par within the next maybe 12 to 18 months.
Thank you very much. That's all for me. Okay.
Thank you. There are no further questions in the queue. So I'll hand the call back to our speakers to conclude today's call. Thank you.
Okay. Well, thank you all for your attention and your questions. As always, our IR team stands ready to answer any further questions you might have. So do not hesitate to contact them. And for those who already had your vacations, we hope you have had a great one and relaxing one.
And for those who are going soon, we wish you a great and healthy break. Thanks a lot.
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