Volkswagen Financial Services

Volkswagen Financial Services recorded a solid year in 2023 despite multiple macroeconomic uncertainties. The number of new contracts increased thanks to improved vehicle availability.

STRUCTURE OF VOLKSWAGEN FINANCIAL SERVICES

Volkswagen Financial Services comprises dealer and customer financing, leasing, banking and insurance activities, fleet management and mobility services in 47 countries. The key companies are Volkswagen Financial Services AG and its affiliated companies such as Volkswagen Leasing GmbH, as well as Volkswagen Bank GmbH, Porsche Financial Services and the financial services companies in the United States and Canada, the only exceptions being the financial services business of TRATON and of Porsche Holding Salzburg.

BUSINESS DEVELOPMENT

Volkswagen Financial Services AG achieved an excellent score of 12.4 in Sustainalytics’ first-ever ranking of its sustainability risks. According to the institute, the score achieved by Volkswagen Financial Services AG puts it in the top 3% of the over 200 companies rated. The analysis was carried out in the categories of Product Governance, Data Privacy and Data Security, Business Ethics, Human Capital and Corporate Governance.

Volkswagen Financial Services and the management and technology consultancy Sopra Steria set up the joint venture MyDigitalCar GmbH in 2023. With the services offered, the joint venture partners will make a significant contribution to optimizing economic efficiency in the area of vehicle management for companies by enabling companies to register their vehicles digitally via a vehicle registration platform.

Volkswagen Financial Services and AMAG Leasing AG extended their collaboration in fleet business operations in Switzerland in 2023. As a result, Volkswagen Financial Services AG acquired a 50% stake in movon AG, a subsidiary of AMAG Leasing AG that focuses on fleet leasing and full-service solutions for business customers. The aims of the joint venture are to expand the range of products and services and to create digital tools for fleet owners and dealers.

Volkswagen Financial Services and Pon Holdings (Pon) intensified their partnership in company bike leasing. Within this framework, Volkswagen Financial Services AG acquired a 49% stake in the Pon bike leasing subsidiary Bike Mobility Services. The aim is to jointly expand in the growing bicycle and e-bike leasing business in Europe and the USA.

As part of the “AllerVielfalt” project, the Alte Aller, an old branch of the River Aller in the District of Verden, was reconnected to the main river in the reporting year. Initiated by the German Nature and Biodiversity Conservation Union (NABU), the project is part of the federal government program “Germany’s Blue Belt” (“Blaues Band Deutschland”) and aims to create near-natural structures in a project area of 2,350 hectares (around 30 river kilometers). Volkswagen Financial Services donated €450,000 to cover NABU’s share, thereby ensuring the important start-up financing for the project.

The main refinancing sources for Volkswagen Financial Services are money market and capital market instruments, asset-backed securities (ABS) transactions, customer deposits from the direct banking business and bank credit lines. Volkswagen Financial Services AG published its first “Green Finance Framework” in the reporting year. The framework supports the current sustainability strategy of the automotive financial and mobility services provider with regard to its refinancing and thereby enables the company to tap into a new investor base. The “Green Finance Framework” covers all refinancing products of Volkswagen Financial Services AG. The funds generated under the framework will be used exclusively to refinance credit and leasing contracts for battery-electric vehicles.

On the basis of the Green Finance Framework, Volkswagen Leasing GmbH placed three green bonds with a total volume of €2 billion on the capital markets for the first time in September 2023. In December of the fiscal year now ended, Volkswagen Financial Services N.V. also issued bonds amounting to 1.5 billion Swedish kronor and 1 billion Norwegian kroner based on the Green Finance Framework.

Other bond transactions were conducted in currencies such as pounds sterling, Swedish kronor, South Korean won and Japanese yen, among others. Furthermore, bonds were issued in Australia, Poland, Brazil and Türkiye on the basis of local documentation requirements. In addition to this, private placements were issued in various currencies.

Volkswagen Bank issued three unsecured bonds denominated in euro in the reporting year with a total volume of €2.0 billion.

In fiscal year 2023, Volkswagen Leasing GmbH placed three ABS transactions secured by lease receivables with a total volume of €2.75 billion. The issuances met the quality criteria of the STS Securitization Regulation for particularly high-value securitizations and were oversubscribed several times.

Outside Germany, Volkswagen Financial Services issued ABS transactions in Brazil, Japan, the United Kingdom and Australia.

In the US capital market, Volkswagen Group of America Finance, LLC placed bonds with a total volume of USD 5.65 billion in September and November 2023. Notes with a volume of CAD 750 million were issued in the Canadian refinancing market.

In fiscal year 2023, the number of new financing, leasing, service and insurance contracts from Volkswagen Financial Services signed was up on the prior-year figure at 8.7 (7.8) million. At the end of the reporting year, the total number of contracts stood at 22.3 (22.0) million. The number of contracts in the Customer Financing/Leasing area fell by 1.5% to 10.2 million. The Service/Insurance area accounted for 12.1 million contracts, 3.9% more than in the previous year. From January 1, 2024, other types of insurance contracts will be taken into account; in this case, the number of contracts in the Service/Insurance area as of December 31, 2023 would have been 15.6 million and the total contract portfolio would have comprised 25.8 million contracts. With credit eligibility criteria remaining unchanged, the penetration rate, expressed as the ratio of financed or leased vehicles to relevant Group delivery volumes – including the Chinese joint ventures – increased to 32.6 (32.3)%.

On December 31, 2023, Volkswagen Bank managed 1.8 (1.3) million deposit accounts. Volkswagen Financial Services employed 15,439 people worldwide, including 7,311 in Germany, as of year-end 2023.

Bicycle leasing

SALES REVENUE AND EARNINGS

Volkswagen Financial Services generated sales revenue of €50.8 billion in the reporting year, 15.5% more than in the previous year. As expected, the operating result contracted to €3.3 (5.6) billion. In addition to higher interest expenses, the decline was primarily attributable to adverse effects from derivatives, which had had a positive effect in the prior year. Lower risk costs and strong demand for used vehicles had also had a positive impact in the previous year.