Under focus: The transformation of automotive financial services

December 2, 2021


This year's Mobility Circle, hosted by Prof. Dr. Bratzel, Founder and Director of the Center of Automotive Management, took place against the backdrop of an ever more rapidly changing mobility world. The congress was staged this time in the high-rise office tower housing the publishers of the Süddeutsche Zeitung in Munich. Numerous mobility experts from a wide range of industries were invited to discuss opportunities, challenges and new technologies at the hybrid event. Stefan Imme, CDO of Volkswagen Financial Services, was one of the main speakers and explained the part that automotive financial services will be playing in all the coming changes.

Electrification, connectivity and autonomous driving on the one hand, direct sales, digital identities and real-time processes on the other – both the automotive industry and the financial industry are facing a comprehensive digital transformation. In the domain of automotive financial services, these changes in the sectors intertwine seamlessly and act like a converging lens, concentrating and bringing into clear focus the effects of technological change and digital transformation. The potential this holds was taken up by the keynote address Stefan Imme delivered at the Mobility Circle. "Traditionally, we come from the field of vehicle financing, but we have purposely expanded our product portfolio in recent years," said the CDO of Volkswagen Financial Services. This is because the company's core business nowadays also includes used car marketing, the fuel and charging card business, smart parking, and payment services. A further field is vehicle rentals, which is playing an important role particularly in the light of new mobility requirements. "A large part of the classic rental business involves the loan of workshop replacement vehicles at car dealerships. We have been active in this area for a long time already. So it seemed an obvious move to bring our existing product range together within the consistent framework of Auto Abo car subscriptions and develop it further in a natural way." 

At the same time, traditional single-channel selling via the dealer partners at the point of sale is evolving into multi-channel selling. As a result, customers now reach Volkswagen Financial Services through many different "entrances" from both the online and the offline world, and this creates a significantly larger number of customer touchpoints. These multiple engagement channels include, for example, the company's own customer portal, online direct sales, in-car payments, the digital ecosystems of the Group brands, independent used car platforms such as heycar, or the traditional path through the dealer partners.

When looking at the actual customer needs for their primary mobility requirements, Imme referred to a study conducted by the Boston Consulting Group in which 600 people were asked about their mobility needs. According to this study, although flexibility in the terms of the contract is an important argument for many customers, only a few are willing to pay extra for this. To those interviewed, a low monthly all-inclusive installment was a more important consideration. Imme commented: "I assume that a kind of sweet spot, a trade-off point between flexibility and price acceptance will develop. Finding this optimal balance will be an exciting task. But we can already see that in the future we will not only be using micromobility vehicles to get around, and the monthly mobility costs are then indeed the decisive factor."

A key task for the future is to offer mobility services via a single platform, Imme continued in his presentation. After all, the customer's smartphone is where the business models of car subscription, full-service leasing, leasing and financing converge. Automotive financial service providers are well equipped for precisely this mammoth task. As Imme pointed out, they have optimal access to vehicles, an established brand reputation, strong fleet management capabilities, and reliable access to the capital market. "Strictly speaking, we all satisfy these criteria. And we are also on the right track when it comes to the user experience. But, having said that, it is still the big international e-commerce and digital players who dominate the field here," he said.

Another important aspect for viable business models in the mobility sector is how the share of mobility services sold (= share of wallet) relates to customer loyalty, Imme noted. While relatively few services are automatically booked in addition to cash purchases or leasing, the loyalty rate or the repeat business rate for re-entered contracts is high. In contrast, in the case of sharing and Mobility as a Service offers, all services are integrated and therefore priced in, but the necessary customer loyalty is lacking due to the very high flexibility with short terms. "Similar to the situation with flexibility and costs, we also have to find the sweet spot here in our range of offers between selling our services and a high level of customer loyalty," Imme said. He added: "For this reason, we now also offer car subscriptions, develop them for the brands of the Volkswagen Group, and integrate the services of various cooperation partners within them, including the Verimi identity platform, to create a mobility flat rate on demand." Subscriptions are an important sales channel, especially for the sale of electric vehicles, and are in high demand, the CDO maintained.

But what happens when contact with the dealer partner is no longer the only way for customers to buy a car? This is exactly why Volkswagen Financial Services founded heycar as a brand-independent used car platform, in which prestigious investors such as Allianz, Renault, Daimler and Volkswagen AG have since become involved. Imme explained: "We have deliberately placed heycar in the brand-independent used car segment. Ultimately, however, it serves as a complete e-commerce platform through which we are able to sell mobility offers digitally. It is intended to match how customers will be consuming mobility in the future." Heycar offers great potential for creating an integrated digital shopping experience, he insisted. In the final analysis, Imme concluded, automotive financial services providers are well able to manage a loyalty lifecycle and offer an extensive range of services on the basis of customer and vehicle data. "We firmly believe that not just every customer, but also every vehicle are unique and individual. We see ourselves here as a matchmaker, with the goal of offering customers the right vehicle at the right time and at the right price."

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