French investments in Romania: Building on solid foundation

France and Romania became business partners in the early '90s and since then the bonds have been built on trust and mutual commitment. Currently, French investors have gained a leadership position in many sectors and SMEs are numerous and dynamic, with direct and indirect investments from France ranking third in Romania's list of foreign investors.

2017-06-20 16:26:46 - From the Print Edition

Both countries have a long tradition in trade exchange and the French companies have realized the potential and the importance of a close partnership with Romania, establishing businesses since the early 1990s. According to some figures, more than 4,000 companies with French capital are active in the country and French investments totalled over four billion Euro in Romania.
Petre Barac talked to representatives of French companies on the local market to emphasize their strategies and investments for 2017 and the years to come.

Arval Romania to invest 35 million Euro for its fleet renewal in 2017

In past years, the growth trend was very good if we look at new operational leasing car registrations in relation to total registrations, according to Dan Boiangiu, CEO Arval Romania.
"The figure is constant at around 16 per cent and it's good for us because we are getting a constant percentage of a growing market," he told The Diplomat-Bucharest. "Last year was a very good one, even if figures show an increase of only eight per cent. We must get used to smaller growth rates, because we are no longer in a race for market share as it was before. Concerns about the past have changed, everyone is now paying attention to costs. First, we need to know them, keep them under control and try to reduce them. We find that each year the total cost of ownership of a fleet grows naturally by at least five per cent. Any new car that enters the market is more expensive, with all kinds of equipment to comply with European regulations. There are new technologies and of course higher costs."

Boiangiu also said there are various factors they are studying together with the client before the car acquisition. "The first one is the choice of the model and then we organize all the processes and documents," he said. "The clients are losing too much time in this process, so when it comes to company cars we believe that these things can be done efficiently without wasting any time. We call it company car policy, in which we set certain criteria and options for any budget. Another important aspect is mobility financing, such as bank credit or operational leasing."

Finally, the most important factor that has an impact on costs is the driver's behaviour in the car. "We are working very hard on digitization projects to monitor both relationships between us and the drivers, as well as between us and our car. The cars will change a lot in the future, for sure. We are already talking about autonomous cars, everything will be digital in this sector. First, we need to know how these cars behave. After that, we can provide recommendations that deliver high benefits on costs and safety."

Arval's CEO stated that the economic environment is changing so often that it is difficult to determine if we can have stability and predictability. "The world is interconnected and we must always be ready to take action. I think we have to get used to this environment of uncertainty and volatility in the future because it is very hard to anticipate what will happen in the business environment," he underlined.

Arval Romania's investments are mainly in fleet renewal so they can buy new cars every year.
"We invested 30 million Euro last year for new car purchases," Boiangiu said. "For 2017, we estimate investments of 35 million Euro. Our goal is to renew our fleet as often as possible. Clients that buy cars are using them for an average of nine years, while a car bought in operational leasing has a much shorter usage. Now, we have 7,600 leased vehicles and things are going according to plan, for both the first quarter and whole year forecast."

The largest order ever received by Arval was of 800 cars from a client in the energy industry. "In my opinion, the most relevant indicator for the evolution of our business is the fleet. If the fleet grows, you have more rents to buy from customers and that means you′re doing well," Boiangiu concluded.

Groupama Asigurari to focus on life and health insurance opportunities

French investors have gained a leadership position in many sectors and SMEs are numerous and dynamic, with direct and indirect investments from France ranking third in Romania, which proves once again France's long-term commitment and efforts to sustain economic development in Romania, Francois Coste, CEO of Groupama Asigurari and President of French Chamber of Commerce and Industry in Romania, told The Diplomat-Bucharest. "We have just celebrated ten years of Romania in the EU. I believe that 2017 is another important year to better integrate Romania into the EU, moreover with the looming Presidency of the European Council by Romania in the first half of 2019, as well as the perspectives of being part of Schengen and Euro zones, and of course the end of MCV process."

Francois Coste hopes that by end of year, Romania's economy will strike the right balance between a strong growth of GDP on the one hand, which is essential for Romania's convergence within EU and for social cohesion, and, on the other hand, a controlled deficit of Public finances.
There are two main reasons for investors to be attracted by Romania, in his opinion; namely the potential of growth on the local market which is catching up, as well as the competitive Romanian sourcing for manufacturing and services.

"We believe that Romania has opportunities when it comes to the automotive, healthcare, R&D and IT&C fields," said Coste. "We are also aware of the potential Romania has from this perspective and we encourage initiatives in this field. Let's not forget the country's great potential in agriculture, as well, because Romania was once called the granary of Europe. Therefore, opportunities to regain this stature have remained, and both entrepreneurs and business men should capitalize and act on them."

Groupama's CEO pleads for a more transparent, stable and comprehensive framework, to ensure a competitive and sustainable business environment. "The latest Barometer of the French Chamber of Commerce in Romania, a periodical survey polling CEOs′ perceptions on the short term economic outlook, shows that companies are extremely optimistic about the evolution of their yearly turnover in the context of a positive economic drive but rather cautious about new investments as they are carefully expecting the impacts of the measures announced by the government in terms of fiscal or labour reform," he noted. "The fiscal measures adopted by the government at the beginning of the year are, in principle, good for the economy, as more money will be available for individuals to invest in their well-being. Notwithstanding, it is very challenging for Groupama and many other companies to find efficient opportunities to compensate the sudden rise of staff costs. The capping of MTPL tariffs is harming our insurance industry and creates collateral impact on other lines of business which are important for the development of the economy."

Talking about the company's development, Francois Coste said that 2016 was the third consecutive year when they succeeded to generate a profitable growth for the company five points above the market.
"2017 is of the same pattern," he continued. "We plan to leverage on the current commercial dynamics to consolidate our position as one of the leaders of the insurance market and we will continue to be close to our clients, ensuring the continuity of their personal and professional plans when unforeseen risks insured at Groupama arise. From a business perspective, we aim for a ten per cent increase in gross written premiums and a profitability level like the one registered last year, 30 million RON (6.6 million Euro)."

Groupama's CEO added that, this year, the company wants to focus on life and health insurance, as they see important opportunities in this segment, without neglecting other segments. "We have launched our first communication campaign dedicated to life policies, a campaign promoting values that animate everything we do within Groupama," said Coste. "We are also investing significantly in technology and data science. Groupama remains the largest employer in the insurance sector and we continue to invest in our people, their skills and engagement in the service of our strategy. The evolution of our business is closely related to the evolution of economic and financial indicators. Our plans are to continue investing in innovation so that our products and services are in line with the customers' needs. These achievements will allow us to further gain customer preference and enhance our strong position on the CASCO, Home, Property, and Agricultural lines of business, as well as increase our market share in other lines of business, such as Life and Health."

Groupama Asigurari closed 2016 with a 16 per cent increase in revenue, with a turnover of 932 million RON (207 million Euro) and a net profit of approximately 30 million RON (6.6 million Euro). The number of employees counted 1,546 by the end of last year. The company is targeting a ten per cent increase in turnover and a profitability rate similar to that of 2016.

ALD Automotive wants to focus on SMEs and corporate segment

Romania has great potential for long-term investments and economic development, according to Frederic Banco, General Manager ALD Automotive Romania, who is optimistic about the economic perspectives of the country.

"France and Romania have a long tradition in trade exchange and a strong and close cultural and linguistic relationship," he told The Diplomat-Bucharest. "The French companies have realized the potential and the importance of a close partnership with Romania, establishing businesses since the early 90s. According to public figures available now, more than 4,000 companies with French capital are active in the country and in 2015, French investments totalled 4.1 billion Euro in Romania."

In his opinion, Romania will witness a sustainable growth in key sectors such as automotive, new technologies, agriculture and creative industries. "Also, Romania remains a strategic choice for foreign investments with a high-performance IT infrastructure, high-level engineering and IT skill," Banco added. "The business community has great expectations regarding the growth and development of the country and I am confident in the ability of the business environment to find a balance between the opportunities and social and economic context. As the Foreign Investors Council stated recently, Romania must move from a low-cost status to a "competitive" country. Romania is a country with plenty of development opportunities and a well-qualified and competitive workforce, but it must offer a more sustainable and strategic vision by demonstrating its real potential by investing in sectors with high added value."

According to Banco, Romania has been an attractive country for foreign investors due to its strategic geographical location, low labour cost, an education system which promotes multilingualism and delivers high skilled professionals on the labour market. "Although these competitive advantages are still solid, the country begins to confront some serious issues like the lack of qualified workforce or the difficulties faced by the vocational education system or brain migration," he mentioned. "However, we are all aware that there are opportunities in the market when we are talking about the automotive or agricultural sectors, energy industry, or even tourism. I believe that tourism is a promising sector that can generate many jobs and until now from what I'm seeing has a modest level of development in relation to its real potential."

Furthermore, the general manager of ALD Automotive said the operational leasing market in Romania grew year by year and the company managed to develop together with the market.
"The company had a positive evolution in previous years and until now the trend is positive as well and we are on the planned growth pace," Banco said. "Last year, we registered a 12 per cent increase of the operational leasing fleet. The full-service product had a significant advance in our portfolio, 98 per cent of the over 8,000 vehicles of our fleet being contracted in full service operational leasing at the end of last year. In 2016, we acquired over 2,500 vehicles, up to 40 per cent over the previous year and we have increased the number of our clients, adding to our portfolio over 100 new companies."

This year, ALD Automotive launched ALD Electric, the first operational leasing product for electric and plug-in hybrids vehicles available in Romania. The new service is part of the ALD Bluefleet, through which ALD Automotive proposes solutions for curbing CO2 emissions and fuel consumption and offers consultancy to the companies for their auto policies to have an impact on the environment as low as possible.

"We'll continue to improve the main objectives we set last year: maintaining customer satisfaction, the growth of our operational leasing fleet by increasing the number of SMEs customers and adapting existing products to current customer needs for multinational companies," Frederic Banco added. "We are focusing on the development of White Label partnerships, a product designed for SME customers. At the same time, we are looking to further improve the products dedicated to the corporate segment, which represent the majority of clients in our portfolio, and customize them to their needs. For both large and SMEs companies, the development of mobility solutions will continue to be a priority for us."

ALD Automotive has a long-term digital innovation plan, with mobile applications, telematics solution, mobility options, which are already implemented in Western Europe.
Also, one of ALD Automotive's most important areas of development over the last years has been environmental protection. Therefore, the company has offered defensive and ecological driving classes, through partnership with the Titi Aur Academy and has been involved in consulting both customers and employees by offering test drives of the latest electric car models in the local market.

Renault to support development of new vehicle market

The Director of Renault Romania, Yves Caracatzanis said that the French group upholds the measures that support the new vehicle market development, the Rabla scrappage programme being important because it allows customers to have access to new and modern vehicles.
The statement was made in a joint conference with Prime Minister Sorin Grindeanu, on a working visit to Renault Technology Centre in Titu, Dambovita County.

"As regards the market for new vehicles and second-hand cars, we uphold the measures supporting the development of new vehicle market. The Rabla scrappage programme is important to us because it allows customers to have access to new and modern vehicles, so for us this represents a major aspect," said Director Caracatzanis when asked about removing the environmental stamp and the alternative found by the Government for its replacement. "I saw the results on imported vehicles at the end of February, we are closely following the evolution of the ratio and balance between the percentage of new vehicles and imported vehicles in Romania."

The director of Renault Romania also introduced the topics discussed with Prime Minister Sorin Grindeanu.
"There are five major points that we discussed, firstly, the new vehicles′ market and the topic of the fleet renewal, another topic of interest is education, everything that allows us to prepare for the future and to have an education system which corresponds to our needs, then obviously the competitiveness, the infrastructure. Here, these are the topics that we discussed with the Prime Minister, in a constructive and partnership spirit," he concluded.