Eurodrive at Delek Rehev: Does Zero-km and Leasing Add Value or Just Volume

The main article already argued that Eurodrive is one of the key tests inside Delek Rehev's 2025 story. This follow-up isolates only that test. The question is no longer whether Eurodrive made the group larger. It clearly did. The real question is whether Delek Rehev bought a new value engine, or mainly a capital-heavy volume engine.

At this stage the evidence still leans toward the second reading. From the acquisition date through year-end, Eurodrive added about NIS 448 million to consolidated revenue, a fleet of about 3,000 vehicles, operational leasing for business and private customers, and a broader resale channel in zero-km, used vehicles and two-wheel or utility vehicles. But in the same year group gross margin fell to 13% from 16%, and the company explicitly says part of the decline came from the first-time consolidation of Eurodrive, whose activity carries lower margins than the rest of the group.

That is the core point. Synergy is still a promise. The capital is already on the balance sheet. By the end of 2025 the group already carried about NIS 351.5 million of net vehicles under operating lease, and another roughly NIS 86.2 million of purchases of vehicles for operating lease already showed up in cash flow during the second half. Management may ultimately be right that Eurodrive broadens the product set, deepens customer relationships and creates cost savings. As of the end of 2025, the filing still does not prove that in the numbers.

Four Points To Hold In Mind

• Eurodrive softened a decline. It did not yet create clean growth. Delek Rehev says Eurodrive contributed about NIS 448 million to consolidated revenue, yet total group revenue still fell by about NIS 185 million and vehicle sales revenue fell to about NIS 3.043 billion from about NIS 3.240 billion. Eurodrive mainly covered for a deeper weakness in the legacy engine.
• Most of the disclosed sales volume comes from zero-km. Eurodrive sold about 1,850 vehicles in the second half of 2025. Separately, the group reports 1,515 zero-km vehicles sold through Eurodrive over that same period. The disclosed volume is therefore heavily skewed toward the channel where leasing companies offer new cars below the official list price.
• The model pulls vehicles onto the balance sheet before it pushes value into earnings. On provisional purchase accounting, Eurodrive brought about NIS 328.3 million of vehicles under operating lease into the group. By year-end the balance had already grown to NIS 351.5 million net.
• Leasing value depends on residual values, not only on deliveries. The accounting policy says vehicles under operating lease are depreciated based on expected useful life and estimated residual value, at an average annual depreciation rate of about 14%. Management separately flags falling vehicle prices as a direct risk to fleet values.

Zero-km Already Dominates The Volume

Eurodrive adds two very different activities to Delek Rehev. The first is operational leasing, typically around three-year contracts with a fixed monthly payment and services that include maintenance, insurance, licensing and treatments. The second is a trading channel that sells zero-km vehicles, trade-in vehicles and vehicles coming off lease. Both can be described as a broader vehicle platform. Economically, they are not the same product.

The filing itself is clear on what the zero-km market is. Leasing companies buy vehicles and sell them to private customers as new cars that have already been registered as first owner, at prices below the official importer list price. That means the channel is designed to preserve movement and volume through more aggressive pricing. That is not automatically bad. It simply means the right question is not whether there is a sale, but at what price, with what margin, and against what impact on brand economics and residual values.

The second-half figures sharpen the point. Eurodrive sold about 1,850 vehicles in the period, while the group separately discloses 1,515 zero-km vehicles sold through Eurodrive in that same window. That implies roughly four fifths of the disclosed sales volume came from zero-km. The filing does not split the remaining roughly 335 units between trade-in, lease-end used vehicles and other sales, but it does make the center of gravity obvious.

That matters because it answers what Delek Rehev really added in 2025. Not only more customers and not only more services, but also a commercial channel whose economics rest on bulk buying, consumer discounting and inventory rotation. That channel can be very attractive if it is integrated properly with leasing, financing, trade-in and used-car monetization. It can also become a channel that inflates revenue while pressuring quality of earnings.

There is another angle here that is easy to miss. Eurodrive's roughly NIS 448 million of revenue contribution did not turn the vehicle segment into a growth story. The opposite is true. Vehicle sales revenue still fell by about NIS 196 million despite Eurodrive. On a simple bridge, stripping out Eurodrive implies the legacy vehicle business would have ended 2025 at roughly NIS 2.595 billion, down about NIS 645 million versus 2024. That means Eurodrive acted first as a shock absorber for the old decline. To become a value engine, it has to do more than that.

The Balance Sheet Expanded Faster Than Profit

The bull case on Eurodrive rests on a broader vehicle platform. A stricter reading has to begin with the balance sheet. The acquisition did not bring only a sales channel. It brought assets, liabilities and commitments that need to be funded and carried.

On the provisional measurement of the first-stage acquisition, at the June 16, 2025 completion date, Eurodrive's identifiable net assets stood at about NIS 184.9 million. Inside that were about NIS 328.3 million of vehicles under operating lease, about NIS 113.7 million of intangible assets, about NIS 351.4 million of bank credit and about NIS 175.7 million of suppliers and service providers. The transaction also created goodwill of about NIS 88.8 million. In other words, what entered the group was not a light brokerage platform. It was a business carrying a large operating asset base alongside a meaningful funding layer.

The consideration structure tells the same story. The accounting cost of the first step was about NIS 273.7 million, yet only NIS 100 million of that was paid in cash. Most of the remaining economic commitment came through a roughly NIS 178.0 million put liability to the remaining holders, net of a receivable from price adjustment. In parallel, the financing section says the group took about NIS 210 million of long-term bank loans for the purchase of Eurodrive. This was not simply "one more activity." It changed funding needs and balance-sheet shape.

By year-end the picture was even clearer. Vehicles under operating lease stood at about NIS 351.5 million net. To get there, about NIS 328.3 million came in with first-time consolidation, another roughly NIS 86.2 million of fleet purchases were added during the year, about NIS 35.3 million were transferred out to inventory, and about NIS 27.7 million of accumulated depreciation was recorded. That sequence captures the core economics of Eurodrive: first hold the car, then depreciate it, and only then try to extract value through leasing, used-car disposal or zero-km sale.

That chart is the heart of the argument. It shows that Eurodrive does not only generate transactions. It ties up capital. Once that is connected back to cash flow, the second half of 2025 already included a real use of about NIS 86.2 million for purchases of vehicles for operating lease, while the group as a whole also paid about NIS 89.7 million of lease liabilities. Anyone who focuses only on revenue or on the broader service story misses the practical picture: this channel requires ongoing funding, not only clever selling.

Funding flexibility is not free either. The company says Eurodrive is subject to a financial covenant requiring equity to balance sheet not to fall below 15%, and that the tested ratio at December 31, 2025 stood at about 19%. That is not a breach. It is a reminder that Eurodrive needs to be read through capital discipline as well as through delivered volume.

Synergy Is Still A Promise, Not A Result

Management explicitly says the acquisition and integration of Eurodrive should create higher operational and managerial flexibility, cost savings and synergies with the rest of the group. That is the positive case, and it has a reasonable commercial logic. Eurodrive serves both business and private customers, holds a customer book described as high quality and mainly in the pharma sector, and allows Delek Rehev to offer not only a one-off sale but a broader lifecycle relationship with the customer.

But this is where strategic logic has to be separated from proven economics. What 2025 proves numerically is not the saving, but the cost. Group gross margin fell to 13% from 16%, and the company explicitly ties part of that decline to the first-time consolidation of Eurodrive, whose activity has lower margins than the rest of the group. Selling and marketing expense rose to about NIS 315.3 million from about NIS 306.8 million, while general and administrative expense rose to about NIS 166.4 million from about NIS 151.1 million. In both lines, the company says Eurodrive contributed to the increase.

That does not rule out a better economic picture in 2026 or 2027. It simply means that anyone arguing synergy has already been proven is moving too fast. The annual filing gives a fairly detailed description of the operating model and fleet scale, but it does not give a standalone Eurodrive profit or cash-flow line that would numerically prove the synergy case.

That gap matters even more because leasing economics depend not only on signing the customer, but also on the vehicle's exit value. The accounting policy makes that explicit. Vehicles under operating lease are depreciated based on expected useful life and estimated residual value. Put simply, part of the model's profitability is deferred into the future through an assumption about the price at which the vehicle can later be realized. That is why management's own risk disclosure matters so much: falling vehicle prices can hit fleet values, and changes in employee-tax treatment and taxable benefit on company cars can affect demand.

This is the point where zero-km and leasing meet. If market prices weaken, the zero-km channel may require deeper discounting, while the leasing fleet may rely on lower residual values. So the value case for Eurodrive will not be judged only by how many vehicles it can move, but by how much capital it needs to carry that volume and at what value it can later release it.

What Has To Happen Next

For Eurodrive to move from the category of "volume engine" into the category of "value engine," three things need to become clearer over the next 2 to 4 quarters.

First, the group needs to show that Eurodrive's integration is no longer dragging consolidated gross margin lower. If zero-km remains the dominant sales channel without a margin recovery, it will be hard to argue that Delek Rehev bought quality.
Second, the operating-lease fleet needs to look more like a controlled capital cycle and less like a balance-sheet sink that needs further fleet purchases just to sustain revenue.
Third, synergy has to move from management language into numbers. That could show up through better cost ratios, better gross-margin stability, or a visible combination of leasing, used cars, service and sales that improves customer economics rather than only scale.

As of the end of 2025, Eurodrive has already proved that it changes Delek Rehev's perimeter and the shape of the statements. It has not yet proved that it expands the value pool at the same speed. The conclusion at this stage is therefore fairly sharp: Eurodrive currently looks more like a capital-backed commercial bridge that softens the decline in the legacy import engine, and less like a new profit engine that has already proved itself. That can still change. Right now, the filing offers much more evidence for volume than for value.