In addition to the automotive business, financial services form an important pillar of the Volkswagen Group. Volkswagen Financial Services AG supports the Company’s growth path by providing customized mobility packages and through systematic internationalization. Hans Dieter Pötsch, CFO of the Volkswagen Group and Chairman of Volkswagen Financial Services AG’s Supervisory Board, talks about the significance of this area for Europe’s largest automaker with journalist Wolfgang Kaden.
WOLFGANG KADEN: Mr. Pötsch, why does an automaker such as Volkswagen need its own financial services provider?
HANS DIETER PÖTSCH: Financing and automobiles are inseparable. Facilitating mobility for today’s customers often also means offering them an attractive way of financing their vehicle. Only one in three customers in Germany pays cash for their new vehicles – everyone else finances or leases them. So this is an extremely attractive business area.
For years, management doctrine has preached focusing on your core business …
And we see financial services as part of our core business. It allows us to cover yet another major link in the automotive value chain. Customers receive a full-service package that not only includes the actual financing, but also additional car-related services such as insurance, servicing, or extended warranties.
What role does financing play for the relationship between the customer and the brand?
It’s of fundamental importance. Customer loyalty is extremely important for our brands. And it’s substantially stronger if customers lease or finance and insure their vehicles through Volkswagen Financial Services, and therefore continue their relationship with us over a longer period of time.
Does this also create closer links to Volkswagen’s authorized workshops?
Definitely. Our financial services encourage access to our authorized workshops. We have also found that our financing customers are more likely to use genuine parts when servicing their vehicles than other customers.
To what extent can you tailor your mobility packages to the wishes of individual customers?
Our goal is to give each customer group real added value. For example, we can offer buyers of small vehicles special deals, without which this customer category would be unable to own a car. And at the other end of the spectrum, we can create tailored packages for customers who want to have allround service.
What role do financial services play in general in the Group’s global growth strategy?
A crucial one. For example, we recently established a Financial Services subsidiary in India. However, financing behavior varies greatly from country to country: the percentage of people who pay cash in China is very high. The reverse is true in India, where they already have a lot of experience with financial services. These cultural differences must be taken into account in financing. This is why we always move into new markets together with our colleagues from the automotive brands, thus helping them to sell more vehicles.
Does this also apply to setting up distribution networks?
Yes. This is another area that is particularly important in addition to customer financing. We have to set up a highly efficient distribution network within a short period of time in countries such as India and Russia. And of course this depends on our providing attractive financing offerings for our partner dealers.
The global financial crisis is making it much more difficult for banks to obtain refinancing. To what extent do you, as the financial services arm of an automobile manufacturer, feel its effects?
Of course we can’t entirely escape the effects of the crisis. But we continue to have access to the capital markets, even if the costs are significantly higher than they used to be. In the past few months, we have managed to place some not insignificant issues in both the USA and Europe. The terms and conditions were better than those offered to our competitors. In other words, we continue to enjoy the confidence of the capital markets.