Volkswagen Finance Withdraws From Lending Activity In India; In preliminary talks with the bankers


As the Indian branch of Volkswagen Financial Services seeks to end its lending business in the country, it is in talks with leading banks to transfer its existing dealer and vehicle finance business.

Volkswagen Finance Private Limited (VFPL) is at an advanced stage of talks with banks including Axis Bank, Kotak Mahindra Prime and ICICI bank, and will likely finalize its panel of preferred financiers by the next quarter, according to knowledgeable sources.

VFPL has not done any full-fledged wholesale financing for its dealers in the past six months.

Sources close to the development indicate that Volkswagen Finance’s relatively limited reach in domestic markets and the VW Group’s decision to consolidate its core business in India are possible reasons why VFPL chose to end its lending business in the country.

Over 100 dealerships representing nearly 70 percent of the Volkswagen Group network in India currently benefit from VFPL financial services.

While the move to other banks and NBFC does not hamper the flow of business for VW dealers, some dealer sources contacted by CNBC-TV18 indicate the timing of the move, when the banks are cautious and the Auto industry is recovering from the impact of the Covid-19 crisis, meaning that the requirement for collateral that banks might ask for can strain reporting.

The Volkswagen group operates the Volkswagen, Skoda, Audi, Porsche and Lamborghini brands in India.

VW Group dealers are currently awaiting details of the company’s new financing program, but so far they have been told to contact Axis Bank, Kotak Mahindra, HDFC Bank, ICICI Bank and SBI for their financing needs.

On the retail side, however, VFPL’s lending business will continue through its automotive fintech subsidiary KUWY Technologies. Volkswagen Finance owns over 50% of the capital of the Chennai-based auto finance aggregator and will be the face of VFPL finance in India.

“With its innovative digital credit platform, KUWY is the market leader in meeting the growing demand for new and used car finance. Based on its positive experience and for commercial policy reasons, VWFPL India, in close coordination with the brands of the Volkswagen group, will review its business strategy for dealer financing by the end of 2021, “Volkswagen Finance told CNBC-TV18.

Axis Bank, Kotak Mahindra Prime, and ICICI Bank did not respond to questions sent by CNBC-TV18 at the time of filing this story.

(Edited by : Abhishek Jha)

First publication: STI


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