Volkswagen Financial Services

The business of Volkswagen Financial Services was robust in a demanding environment in 2022. Electrification and digitalization are increasingly reflected in the portfolio of service and mobility offerings.

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 the Scania and Navistar brands and of Porsche Holding Salzburg.

BUSINESS DEVELOPMENT

The NEW AUTO strategy sets out the Volkswagen Group’s roadmap for the transformation into a software-oriented mobility provider and defines the creation and expansion of mobility solutions as an important core element. Volkswagen Financial Services has adopted a key role under this umbrella and incorporated the Group strategy as an integral part of its own MOBILITY2030 strategy. The core task of Volkswagen Financial Services in this context is to develop and provide a comprehensive mobility platform to give customers quick digital and flexible access to mobility – from classic financing and leasing offerings to car subscriptions (Auto-Abo). This marks an expansion of the existing business model from pure-play automotive financial services provider to mobility provider. Volkswagen Financial Services extends and optimizes the automotive value chain for its customers and the Group brand vehicles, thereby increasing vehicle lifetime values.

This is based on pooling resources on a central, Europe-wide marketing platform for used vehicles for all brands of the Volkswagen Group. The aim is to become one of Europe’s largest providers of used vehicles and in this way to leverage synergies and tap into additional sources of revenue.

For example, the Europe-wide e-mobility program, “Electrification-as-a-Service” (EaaS), supports the electrification of fleet customers’ vehicle pools. The program benefits customers by offering consistent advice and implementation from a single source. Alongside this program, fleet customers are offered new financing for charging infrastructure, which they can use to install the required wallboxes, charging stations, photovoltaic and buffer storage systems.

In the reporting period, partnered by the City of Braunschweig, Volkswagen Financial Services successfully completed a pilot project, unique to Germany, on the digital registration of vehicles by companies. The project is to be used in Germany as a model for a nationwide system and is aimed at allowing legal persons such as companies to register their fleet vehicles online using a specifically developed identification process.

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.

In 2022, Volkswagen Financial Services AG issued two bonds with different terms and a total volume of €2.0 billion. Volkswagen Leasing GmbH did not issue any unsecured bonds. Risk premiums in fiscal year 2022 were heavily influenced by the macroeconomic downturn and the turnaround in central bank policies. Driven by gradual increases, premiums approximately doubled in the first half of the year. In the second half of the year, they remained stable or trended slightly downward.

Other bond transactions were conducted in currencies such as pounds sterling, Swedish kronor, Czech korunas, Hong Kong dollars and Japanese yen. In addition, bonds were issued in Australia, Poland, Brazil, Mexico and Türkiye on the basis of local documentation requirements. In addition to this, private placements were issued in various currencies.

Volkswagen Bank did not enter into any transactions with secured or unsecured bonds in the reporting period.

In fiscal year 2022, 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 a total of four ABS transactions in the United States, Canada, China and Japan.

In fiscal year 2022, the number of new financing, leasing, service and insurance contracts from Volkswagen Financial Services signed amounted to 7.8 (7.8) million and was therefore similar to the prior-year figure. At the end of the reporting period, the total number of contracts stood at 22.0 (22.0) million. The number of contracts in the Customer Financing/Leasing area fell by 5.3% to 10.3 million. The Service/Insurance area accounted for 11.6 million contracts, 4.7% more than in the previous year. 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 – declined to 32.3 (35.8)%.

On December 31, 2022, Volkswagen Bank GmbH managed 1.3 (1.4) million deposit accounts. Volkswagen Financial Services employed 14,796 people worldwide, including 7,488 in Germany, as of year-end 2022.

E-Mobility Program

SALES REVENUE AND EARNINGS

Volkswagen Financial Services generated sales revenue of €44.2 billion in the reporting period, 6.0% more than in the previous year. The operating result stood at €5.6 (5.7) billion. Strong demand for used vehicles had a positive effect, as did derivatives. However, expenses relating to loss allowances and risk provisions as a consequence of the direct impact of the Russia-Ukraine conflict weighed on the operating result.