Volkswagen Financial Services

STRUCTURE OF VOLKSWAGEN FINANCIAL SERVICES

Volkswagen Financial Services’ portfolio of services covers dealer and customer financing, leasing, banking and insurance activities, fleet management and mobility offerings in 51 countries. Volkswagen Financial Services AG is responsible for coordinating the Group’s global financial services activities, the only exceptions being the Scania and Porsche brands, and the financial services business of Porsche Holding Salzburg. The principal companies in this division in Europe are Volkswagen Bank GmbH, Volkswagen Leasing GmbH and Volkswagen Versicherungsdienst GmbH. VW CREDIT, INC. operates financial services activities in North America.

BUSINESS DEVELOPMENT

Volkswagen Financial Services generated record results in fiscal 2014. This success was helped by close cooperation with Volkswagen Group brands, growth in the existing markets and international expansion. In addition, the product portfolio was expanded after Volkswagen Financial Services AG acquired MAN Finance International GmbH on January 1, 2014. Volkswagen Financial Services AG’s core business now includes financial services for trucks and buses following this transaction. Including Ducati Financial Services, the entire range of Volkswagen Group vehicles is now covered.

In the area of New Mobility, Volkswagen Financial Services intensified carsharing activities. Its equity interest in Dutch carsharing market leader Collect Car B.V., better known as “Greenwheels”, was increased at the beginning of 2015. Greenwheels has a fleet of approximately 2,000 vehicles, of which 1,700 are in the Netherlands and 300 are in Germany. The goal is to further develop the business model featuring demand-driven modular solutions.

In Germany, Volkswagen Financial Services is pioneering a convenient way for private and business customers of both Volkswagen and Audi to charge their electric vehicles. Since January 2015 they have been able to use the Charge&Fuel Card to recharge their vehicles and fill up with conventional fuel throughout Germany, benefitting from a simple payment method from a single source and attractive, transparent tariffs. The card and associated smartphone app can be used to pay for all recharging and refueling transactions at cooperating partners’ locations. Fleet customers will be the chief day-to-day beneficiaries of simplified e-mobility management.

Volkswagen Finance China celebrated its tenth anniversary in the reporting period. During this period, the wholly owned subsidiary of Volkswagen Financial Services AG has built up a leading role in the Chinese vehicle financing market. The popularity of automotive financial services in China is growing, and its penetration rate in this traditional cash buyers market grew to approximately 11 % (7 %) in 2014.

Volkswagen Financial Services AG continued its internationalization trajectory in 2014: the Volkswagen Financial Services South Africa joint venture started operations in the spring and is driving forward the development of automotive financial services within the Volkswagen and Audi dealer networks in the South African market. Volkswagen Capital Advisory, a wholly owned subsidiary of Volkswagen Financial Services AG, has been offering vehicle financing and insurance in Malaysia since last fall.

The Volkswagen financial services provider’s funding strategy again proved successful in 2014. The core elements are diversification of the instruments used and the broadest possible local funding. On this basis, money market and capital market instruments, asset-backed securities (ABS) transactions and customer deposits in particular are used for funding.

ABS issues are used to securitize loan and leasing receivables in various currency areas. Receivables totaling €9.1 billion were securitized in 10 ABS transactions worldwide in 2014. Volkswagen Bank GmbH placed Driver 12, the largest European auto ABS transaction since the financial crisis in 2007. The first Chinese auto loans were securitized and sold to investors midway through the year. The Driver China One transaction expanded the ABS program into a new currency area and provided a new source of funding for the rapidly expanding business in China. Volkswagen Financial Services also placed Driver UK Two, the highest volume sterling-denominated ABS transaction. The first bonds were issued in Russia and South Korea, rounding off the capital market activities in 2014.

The number of new financing, leasing, service and insurance contracts signed in 2014 was 4.9 million, 15.6 % more than in the prior-year period (2013 excluding MAN Finance International GmbH, which was acquired on January 1, 2014). At 12.4 million, the total number of contracts as of December 31, 2014 was a new record figure (+15.5 %). This included 7.8 million contracts in the Customer Financing/Leasing area, up 13.0 % on the figure for 2013. The Service/Insurance area posted the biggest year-on-year increase, growing by 19.9 % to 4.5 million contracts. Based on unchanged credit eligibility criteria, the penetration rate, expressed as the ratio of financed or leased vehicles to relevant Group delivery volumes – including the Chinese joint ventures – increased to 30.6 % (28.9 %).

Volkswagen Bank’s direct banking business had 1,403 thousand (1,418 thousand) accounts at the end of the reporting period. Volkswagen Financial Services employed 12,821 people globally as of the reporting date, including 6,248 in Germany.

SALES REVENUE AND EARNINGS

Volkswagen Financial Services generated sales revenue of €22.1 billion in the past fiscal year, a year-on-year increase of 16.6 %. At €1.7 billion, operating profit exceeded the prior-year figure by 5.5 %. Higher volumes offset the increased expenses for meeting regulatory requirements and the continuing pressure on margins. With this new record result, Volkswagen Financial Services continued to make a significant contribution to Group earnings, as it has done in the previous years.