By Ketan Thakkar
Volkswagen Finance Non-public Ltd, the captive finance arm of the world’s largest automotive maker Volkswagen Group, is considering exiting its NBFC enterprise and deciding on the way forward for its Indian operations by the top of this quarter, three folks conscious of the event advised ET.
A call on the finance arm is critical because it comes forward of the group’s most important 2.0 rollout plan within the nation, which goals to develop Group’s market share in India to five% by 2025 from lower than 1.5% share at current. It will compel the Group to make various choices accessible for its dealerships and prospects.
“With its revolutionary digital credit score platform, KUWY is the market chief in assembly the rising demand for brand new and used automotive financing. Primarily based on its optimistic expertise and for enterprise coverage causes, VWFPL India, in shut coordination with the manufacturers of the Volkswagen Group, will assessment its enterprise technique for vendor financing by the top of 2021,”Volkswagen Finance.
The position of the captive finance arm is to assist speed up the mum or dad model penetrate sooner and deeper into the nation as a substitute of simply incomes cash via financing.
At its peak, VWFS disbursed over a billion {dollars} of funds in India, which has greater than halved lately, particularly after it stopped retail funding.
Three folks confirmed that the finance arm has stopped retail lending to its prospects final 12 months and Volkswagen Finance can be anticipated to cease lending to the sellers for inventory funding inside six months.
The choice to cease lending to sellers that accounted for greater than half the mortgage disbursals was mentioned in Could. A proper determination is prone to be taken at a gathering within the coming weeks, say folks conscious of the matter.
“The corporate might even contemplate surrendering its NBFC licence and should change into a commissioning agent or a dealer,” stated an individual conscious of the plans.
With the exit of the captive arm, securing stock funding for a vendor for anticipated greater volumes from 2.0 shall be powerful and should name for a much bigger collateral and better curiosity outgo, say consultants.
A shrinking Indian passenger automobile market, bleeding sellers with a justifiable share of NPAs, and the complexities of competing in opposition to main banks and NBFCs in India compelled Volkswagen Finance to relook at its enterprise mannequin.
The corporate is focusing as a substitute on fintech firm Kuwy to handle the retail consumers. Kuwy is a subsidiary of VWFS.
In 2020, the corporate had stopped lending to retail prospects after it had picked up a stake in a fintech firm Kuwy (in 2019), which is an aggregator platform. Witnessing a powerful traction at Kuwy, VWFS elevated its stake and have become a majority shareholder this January 2021.
In an official response to the ET’s queries, Volkswagen Finance Non-public Restricted stated, in January 2021, VWFPL India acquired a majority stake within the Indian mortgage brokerage portal KUWY Applied sciences as a way to fulfill the rising wants of its retail prospects for digital gross sales channels and particular person financing choices.
“With its revolutionary digital credit score platform, KUWY is the market chief in assembly the rising demand for brand new and used automotive financing. Primarily based on its optimistic expertise and for enterprise coverage causes, VWFPL India, in shut coordination with the manufacturers of the Volkswagen Group, will assessment its enterprise technique for vendor financing by the top of 2021,” added the assertion from Volkswagen Finance.
Over the past 12-18 months, the workforce at VWFS has come down from 300 to 150 and most of them have taken up the place at Kuwy and the sizable a part of the balanced workforce can also be given up the choice to shift to Kuwy, added considered one of 4 folks within the know.
The winding of captive finance arms might not have a big affect, say group corporations.
A senior government at Volkswagen Group stated: “VWFS is an impartial entity. We respect their strategic determination, no matter it might be. Our community, our enterprise mannequin and our product portfolio is powerful sufficient for us to have the ability to handle central tie-ups for alternate finance choices. Sellers have six months to take a look at another association.”
