Volkswagen Financial Services, finance arm of the German auto maker, has joined forces with South African vehicle and asset finance company, WesBank, to form Volkswagen Financial Services South Africa (VFSSA).
Volkswagen Financial Services owns 51% of the new finance provider, and WesBank 49%.
The new company replaces the joint venture (JV) between Volkswagen and WesBank, which was largely funded and controlled by WesBank.
WesBank will now, as a partner, supply services to the newly capitalised entity, said WesBank CEO Chris de Kock on Monday.
“For us it was a logical step to talk to WesBank. We have a partnership that started in 1999, but we felt ready to take it to the next level,” noted Volkswagen Financial Services CEO Frank Witter.
“We think the pond we created will be bigger than each party could have done alone.”
Witter said his company is only entering the local market now as the JV was doing well, while a 2008 restructuring at Volkswagen Financial Services cleared the way for more direct involvement in the country.
“We long had South Africa on our wishlist.”
Volkswagen Financial Services’ entry into South Africa comes somewhat belatedly compared with other vehicle makers, such as Mercedes-Benz.
De Kock said the former JV’s book was around R17-billion in size. The aim is now to build a book of R22-billion over three years, which will have to be capitalised by both parties.
“The business can increase in size, increase in customer base and increase its product penetration.”
The JV provided finance to 22% of all Volkswagen passenger cars sold in 2013. The new company hopes to grow this to 30%, said VFSSA joint-MD Patrik Riese.
He said the new company will make use of a number of new products to achieve higher market penetration.
The range of products and services provided by VFSSA includes traditional installment sale finance, leasing, dealer funding, automotive insurance and fleet management.
VFSSA will, for example, look at expanding a currently limited fleet management portfolio into a more substantial business.
The company also aims to offer fully comprehensive cover in the form of a unit-price insurance policy (flat-rate insurance) for selected Audi and Volkswagen models. The flat-rate model will provide a fixed insurance rate irrespective of the driver’s risk rating or claims history.