Volkswagen Finance exiting India lending business; in advance talks with bankers

Sources close to the development indicate Volkswagen Finance's relatively limited reach in upcountry markets and the VW Group's decision to consolidate its core business in India are possible reasons behind VFPL choosing to wind down its lending business in the country.

More than 100 dealers comprising close to 70 percent of the Volkswagen Group's network in India currently avail financial services from VFPL.

While switching to other banks & NBFCs does not hamper the flow of business for VW dealers, some dealer sources CNBC-TV18 contacted indicate the timing of the move, when banks are exercising caution and the auto industry is recovering from the impact of the Covid-19 crisis, means that the requirement of collateral which banks could ask for may put declares through some pain.

Volkswagen Group operates the Volkswagen, Skoda, Audi, Porsche & Lamborghini brands in India.

VW Group's dealers are currently awaiting details of the new financing program from the company, but so far they've been told to approach Axis Bank, Kotak Mahindra, HDFC Bank, ICICI Bank and SBI for their financing requirements.

On the retail side, however, VFPL's lending activities will continue via its automotive fintech subsidiary KUWY Technologies. Volkswagen Finance owns more than 50 percent stake in the Chennai-based vehicle finance aggregator and will be the face of VFPL financing in India.

​"With its innovative digital credit platform, KUWY is the market leader in meeting the growing demand for new and used car financing. Based on its positive experience and for business policy reasons, VWFPL India, in close coordination with the brands of the Volkswagen Group, will review its business strategy for dealer financing by the end of 2021", Volkswagen Finance told CNBC-TV18.

Axis Bank, Kotak Mahindra Prime & ICICI Bank did not respond to queries sent by CNBC-TV18 at the time of filing this story.