Development automotive banks
The manufacturers’ banks once again had a successful year in 2014. In their core leasing and finance businesses they managed to build on their market position. The automotive banks continued to help sales by their parent companies. For the first time, contract volumes rose to a record value of 95 billion euros. The automotive banks thus managed to add 1.34 million new contracts to help sales by the manufacturers – an increase of 9 percent. That means that they actually grew faster than vehicle sales by the manufacturers. The volume of new business behind these figures actually increased by 11 percent. Overall this means that the automotive banks provided finance and leases for new vehicles worth around 33.41 billion euros. In the commercial market, commercial customers used the economic recovery to invest in their mobility. The manufacturers’ banks managed to support this rise in demand with their good offerings policy. The automotive manufacturers’ banks recorded a rise of 14 percent compared to the previous year with new commercial contracts worth 21.8 billion euros. Commercial finance accounted for 3.5 million euros of this with around 18.4 billion euros being recorded by the traditionally stronger commercial leasing market.
In contrast to market trends, private customers used the offerings of the manufacturers’ bank even more in 2014 with around 595,000 new private finance and leasing contracts worth 11.5 billion euros, a rise of 6 percent. Around 5.5 million contracts meant that the banks have highly stable order books. The volume of contracts rose by 5 percent to a record value of over 95 billion euros. The average finance or leasing amount was 24,970 euros (a rise of 2 percent).
The used car market is a major area of growth for the automotive banks. Dealers sold around 2.7 million used cars in 2014, accounting for 38 percent of all used car sales. Manufacturer-affiliated financial service providers have increasingly entered the fiercely competitive used car market over the last few years and made good progress during 2014. With over 600,000 contracts they grew slightly in terms of unit sales while the contract volume actually rose by 7 percent to 8.75 billion euros.
Another steady growth market for the manufacturers’ banks is the range of additional automotive services such as insurance, extended warranties and maintenance and wear services. With over 3.6 million service contracts, the manufacturers’ banks once again grew by 7 percent in this sector. The finance subsidiaries of the automotive groups recorded around two additional services for each concluded leasing and finance contract during 2014. They also managed to achieve satisfactory growth of 4 percent in the fiercely competitive motor insurance market. That means that around 40 percent of all finance and leasing customers also hold motor insurance provided by the manufacturer.
Another major component is the ever-closer intermeshing of offline and online offerings for consumers. The manufacturers’ banks have recognized this trend and are playing an active role in trying to get closer and closer to the customer. These effects extend from the consistent spread of brand-specific online calculators to new methods of attracting customers on the Internet and getting them to visit a dealership.
On the one hand, the automotive banks create a link between the manufacturer and the end customer, while on the other, they are linked to the equity markets for refinancing. This connection to the real financial world is a special role on the equity markets since the automotive banks are still very different from commercial banks since they are not active in speculative markets. So-called “asset-backed securities” (ABS) are the main tool that are used to refinance the automotive banks. Once again in 2014, automotive ABS were among the most commonly issued investment classes and accounted for more than one-third of the European securities market. For the first time, the EU Commission has assigned a separate asset class to automotive ABS in its special liquidity regulations for banks and the Solvency II regulations for insurance companies. The VDA believes that this is the first acknowledgment of security from the automotive industry as high value assets. In addition, the ECB and EU Commission also called for support for securities for improving finance for the real economy during 2014. The Basel Committee, the EU Commission and the European Banking Authority (ABE) are now developing the future framework for simple, standard, transparent securitizations (SST). In this respect, the VDA is calling for automotive ABS products to be given a high (triple A) rating to acknowledge their status as high-value assets due to the low loss rates they have suffered in the past.