The auto financing arms of Volkswagen AG (VOWG_p.DE) and Ford Motor Co (F.N) plan to cease giving new credit score to automotive consumers and sellers in India and can exit from the nation, sources conscious of the event informed Reuters.
Volkswagen Finance Non-public Ltd, the German carmaker’s finance arm, stopped giving loans to automotive consumers in India final yr and in Could informed sellers of all VW manufacturers, which incorporates Volkswagen, Skoda and Audi, to search out different financing, two sources with direct information of the talks mentioned.
As some prospects didn’t make repayments, the finance unit has suffered losses, and can shut for enterprise by Dec. 31, the sources mentioned.
Greater than 50% of Volkswagen group sellers use credit score from the finance arm, they mentioned.
Volkswagen Finance Non-public Ltd mentioned in an announcement that it had acquired a serious stake in Indian mortgage brokerage portal KUWY Applied sciences to service its retail prospects.
It’s in talks with sellers and can evaluation its enterprise technique by the tip of the yr, the corporate mentioned.
The auto finance arms are categorized as non-banking monetary corporations (NBFCs) they usually compete with banks for offering credit score. However banks have entry to cheaper funding so can provide loans at decrease charges than these provided by NBFCs or shadow lenders.
To offset the drawback, Volkswagen and Ford would provide incentives to these sellers who’ve used their credit score finance, the sources mentioned.
Sellers usually want credit score to purchase vehicles from automakers which they then promote on to prospects.
Volkswagen’s plan to exit the financing enterprise has stunned sellers, coming weeks forward of the launch of Skoda’s new sport-utility automobile (SUV) to spice up gross sales in India, the 2 sources mentioned.
Skoda sellers have been requested to search out new financing by the tip of the month – a good deadline forward of a brand new mannequin launch, one supply mentioned.
Ford Credit score, the automaker’s financing arm, stopped lending to automotive consumers on the finish of final yr and can stop credit score to sellers by June 30, two separate sources mentioned.
The choice to exit the financing enterprise comes at a time when Ford is finalising a brand new technique for India after ending ties with Mahindra & Mahindra (MAHM.NS) on Dec. 31.
A Ford Motor India spokesperson mentioned the corporate often assesses market situations for its credit score enterprise and the choice to discontinue was conveyed to sellers in October – earlier than it made any announcement on the Mahindra partnership.
“We’re assured the auto financing sector in India can assist Ford buyer and seller new financing wants. Our group continues to service our present e-book of enterprise,” the spokesperson mentioned, including that 25%-30% of its sellers do enterprise with Ford Credit score.
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