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Volkswagen, Ford to exit auto finance business in India - sources

Fri 11th June, 2021 1:14pm
By Aditi Shah
    NEW DELHI, June 11 (Reuters) - The auto financing arms of
Volkswagen AG  VOWG_p.DE  and Ford Motor Co  F.N  plan to stop
giving new credit to car buyers and dealers in India and will
exit from the country, sources aware of the development told
    Volkswagen Finance Private Ltd, the German carmaker's
finance arm, stopped giving loans to car buyers in India last
year and in May told dealers of all VW brands, which includes
Volkswagen, Skoda and Audi, to find other financing, two sources
with direct knowledge of the talks said. 
    As some customers failed to make repayments, the finance
unit has suffered losses, and will close for business by Dec.
31, the sources said.
    More than 50% of Volkswagen group dealers use credit from
the finance arm, they said. 
    Volkswagen Finance Private Ltd said in a statement that it
had acquired a major stake in Indian loan brokerage portal KUWY
Technologies to service its retail customers. 
    It is in talks with dealers and will review its business
strategy by the end of the year, the company said.
    The auto finance arms are classified as non-banking
financial companies (NBFCs) and they compete with banks for
providing credit. But banks have access to cheaper funding so
can offer loans at lower rates than those offered by NBFCs or
shadow lenders.
    To offset the disadvantage, Volkswagen and Ford would offer
incentives to those dealers who have used their credit finance,
the sources said.
    Dealers typically need credit to buy cars from automakers
which they then sell on to customers. 
    Volkswagen's plan to exit the financing business has
surprised dealers, coming weeks ahead of the launch of Skoda's
new sport-utility vehicle (SUV) to boost sales in India, the two
sources said.
    Skoda dealers have been asked to find new financing by the
end of the month - a tight deadline ahead of a new model launch,
one source said.  
    Ford Credit, the automaker's financing arm, stopped lending
to car buyers at the end of last year and will cease credit to
dealers by June 30, two separate sources said.
    The decision to exit the financing business comes at a time
when Ford is finalising a new strategy for India after ending
ties with Mahindra & Mahindra  MAHM.NS  on Dec. 31.
    A Ford Motor India spokesperson said the company regularly
assesses market conditions for its credit business and the
decision to discontinue was conveyed to dealers in October -
before it made any announcement on the Mahindra partnership.
    "We are confident the auto financing sector in India can
support Ford customer and dealer new financing needs. Our team
continues to service our existing book of business," the
spokesperson said, adding that 25%-30% of its dealers do
business with Ford Credit.

 (Reporting by Aditi Shah; Editing by Sanjeev Miglani and Louise
 ((; +91-11-4954 8023, +91-11-3015 8023;
Reuters Messaging: twitter: @aditishahsays))
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