Press Releases

Financial services growing around the globe

Frankfurt/Berlin, 16 September 2013

The 65th IAA Cars covered the growth market for financial services in a major symposium held on Monday at the world‘s leading trade show for mobility. Financing and leasing are becoming ever more closely linked with the automotive business. Whereas leasing, rentals and financing have already dominated business with commercial customers for a long time, now the private sector is also showing a rising demand for financial services. The symposium was the fifth of its kind, organised jointly by the German Association of the Automotive Industry (VDA) and the AKA (association of automotive banking and leasing companies), which makes it an “IAA classic” that continues to attract a huge amount of public interest.

The high-calibre speakers included Benedikt Schell, member of the Board of Management at Mercedes Benz Bank AG; Wolfgang Booms, managing director and Marketing and Sales director at Ford of Germany; Christian Ruben, CEO of the Toyota Kreditbank AG; Jens Diehlmann, Partner at Ernst & Young GmbH; and Dr Konrad Wessner of the market research company puls Marktforschung.

In his welcoming speech, VDA Managing Director Klaus Bräunig pointed out that financial services providers have already had their own stands and presentations at the IAA for some years: “Of course, as experts you know that auto banks actually make financing available for many of the trade show innovations in the first place. However, it is less well known that automotive banks play an important strategic role in the marketing of electric vehicles.

In recent years, Bräunig added, automotive financial services have continued developing into a dynamic and innovative area within the vehicle business. “The banks in the automotive industry are a major factor for growth of the sector. They are expanding their business. They also make an important contribution to securing the entire automotive value-added chain. We in the VDA wish to support the auto banks even more and are pleased to see the AKA’s growing interest in greater co-operation with the VDA.”

Benedikt Schell of Mercedes-Benz Bank AG then explained the “Growth factors for automotive financial services in Europe.” The increasing world population and the rising global gross domestic product were ensuring a continually growing vehicle market, Schell said, especially in Asia. And in the medium term growth was to be expected in “old Europe,” too – despite current weak demand. The megatrends – the level of urbanisation would rise to 84 per cent by 2015, and in five years possibly all automobile-related transactions would be carried out electronically via smartphones – which posed new challenges for the manufacturers’ marketing and sales strategies in particular. Considerable growth potentials existed both on the traditional markets and in the emerging economies. Then there were also new business areas, Schell added, for example mobility services and car clubs.

Today the proportions of private and commercial leasing contracts were already nearly equal. “Three out of seven leasing contracts are concluded by private customers,” Schell stated. The automotive industry had to develop even more strongly than before into a “mobility service provider.” In the case of car clubs, people would be considering short-term rental solutions (per day, per week or even per month).

Wolfgang Booms of Ford pointed out that Henry Ford, the company’s founder, was also the “inventor” of the automotive bank: “The Ford Bank was founded way back in 1926.” The brand loyalty of customers who financed their purchase of a new car through this auto bank was 78 per cent, which was far higher than that of other customers (60 per cent). And dealer loyalty (85 per cent) was significantly greater than that of customers not using this auto bank (65 per cent), Booms related. Mobility was certainly just as important to people as ever, but using vehicles was gaining priority over the idea of owning them. “Predictable mobility costs and considering budget restrictions” were additional major criteria. Furthermore, flat rates were becoming more and more popular among car buyers, which included all expenses such as service and insurance – apart from fuel costs. Dealers must use the new communication channels (apps, etc.) more intensively and more efficiently, Booms explained: “Customers want a dealership where they get personal service and everything is provided locally – from one source.”

Christian Ruben, CEO of the Toyota Kreditbank GmbH, described the “European financial service strategy for alternative drive trains” using Germany as an example. The advantage of hybrid vehicles from his company was the costs of service and wear and tear, which were much lower than those for a comparable model with a conventional internal combustion engine. Ruben said that hybrids also did better on fuel costs. The “Toyota Komplett” package was a service package for new cars, which included maintenance, warranty, mobility and insurance. In the case of used cars the warranty was linked to the vehicle’s use period.

Jens Diehlmann of Ernst & Young talked about the global trends in the automotive financial services industry. His conclusion was that “automotive financial service providers always gain more importance within the growth strategy of the OEMs.” Then there were new growth markets: for example, he said in the coming years sales of used cars would rise in China twice as fast as sales of new cars. The auto financing market in India was also expanding rapidly. The auto financial market in the USA was experiencing a strong upswing through subprime financing. Excellent prospects for more dynamic growth across the entire range of financial services.

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