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19 Mar 19

Record-breaking VWFS goes on €850-million-a-year efficiency drive

Volkswagen Financial Services (VWFS) broke two records in 2018: an operating profit of more than €2.5 billion and total assets of more than €200 billion. The Volkswagen Group captive also announced an efficiency programme that should yield annual savings of €850 million from 2025 onwards. 

The captive lessor’s operating profit increased by 6.2% over 2017, to €2.61 billion. Its total assets increased by 11.1%, to €207.6 billion. Not content to break two barriers last year, VWFS for the first time also recorded more than 20 million contracts: following an annual increase of 5.5%, the company had just under 20.3 million units in portfolio at the end of 2018. 

Product categories
VWFS grew in almost all product categories last year. 

  • Financing contracts increased by 5.12% to 6.07 million at the end of 2018. 
  • Leasing contracts grew by 7.42% to 4.04 million. 
  • Service contracts (+13.05% to 3.52 million) were the main driver of contract volume growth. 
  • Insurance contracts (-0.38% to 5.59 million) declined slightly, in part because of the sale of VW Versicherungsdienst in Vienna to Porsche Bank.

Services will continue to power growth. On the one hand, fleet business in Europe will become more important due to the company’s acquisition of Fleet Logistics. On the other, the recent acquisition of LogPay will spur growth in mobility services. 

“We aim to reach 30 million contracts by 2025, and save €850 million annually from then on”, said Lars Henner Santelmann, Chairman of the VWFS Management Board. “It will be achieved by enhancing our productivity, by introducing standard IT systems and by optimising our sales costs.”

Cost-income ratio
Santelmann named the efficiency drive and digitalisation as the basis for VWFS’s strategic goals, which “thanks to our very good performance over recent years, we are today able to set from a position of strength”, he said. 

That position was echoed by CFO Frank Fiedler: “Our focus will be efficiencies as well as sales. VWFS have set the target of achieving a cost-income ratio of 40% by 2025 – it was 49% at the end of 2018.”

As for 2019, Fiedler is cautiously optimistic: “Despite considerable macro-economic uncertainties, VWFS will achieve a good year-end operating result at the previous year’s level, because we’ll also see the first fruits of our efficiency programme.”
 

Authored by: Frank Jacobs