The 17-year-old Volvo Group in India has officially launched its standalone financial services, Volvo Financial Services (VFS). Though VFS has been functioning in India since 2006, it was in the capacity of an alliance with SREI BNP Paribas effective from 2011 to 2014. The move came after receiving a tremendous fillip in terms of sales of Volvo’s different vehicles in India in 2014.
Mr. Scott Rafkin, Executive Vice President and President – VFS, says: “We are always looking at market opportunities. We do that with our product company colleagues where we see that there is a critical mass and a need in the market. Of course, over the last few years, as the slowdown in India has ceased and we see robust growth coming in we see the opportunity for captive financing. But we do not try to time the business cycle with respect to financial services because we are here for the long term as a 20-25 year investment for us right now.”
VFS, set up in January last as a one-stop shop for financial solutions, received its NBFC licence later in August.
With an initial investment of $50 million, the purpose of setting up of VFS at this juncture is explained as to support sales, help grow the market share of the Volvo Group, providing seamless service to its customers, and to attract, retain and develop business, besides working on the motto – Global Strength-Local Expertise. The motto is explained as uniform application of the group’s best practices in all the markets, utilisation of their product knowhow and processes combined with customized operations offering flexibility of work according to the local market needs.
The officials making the announcement clarified their stand that whether their customer is a large fleet owner or a single truck owner, VFS will work with them hand-in-hand and throughout their business cycle. The Volvo Group has among its customers clients who own construction equipment, trucks and buses, and hence VFS’ endeavour is to understand their business model and offer customised and integrated solutions to meet their needs.
Mr. Santosh Aiyer, Managing Director, Volvo Asset Finance India, shares: “One thing is the integrated solution part where we go to the customer along with our product company, and we offer the customer not only loans but also financing on bundle products like maintenance and insurance tie-ups, and we are there to support the customers throughout their business cycle. Say a customer who is doing very well in the uptrend, of course we are happy to be his partner. But even when he goes through the downtrend he will need us. So, unlike some finance companies that tend to reduce their exposure at that time or even go away from the market, we will be a partner to our customer throughout the cycles. In the downtrend, the issue in India always is lack of liquidity even as the customers are still good, and they still have the opportunity. But because of economic conditions the liquidity dries up, so we would be there to support the customer with adequate financing during that time also so that his business does not suffer because of general economic condition which is really outside his capability to control.”
VFS wishes to capitalize on the growing Indian market by offering value and competitive advantage to its customers and dealers. Mr. Rafkin adds: “The opportunity that we have in India is substantial with the Group selling in excess of 36,000 units in 2014 and, of course, then growing over the next few years. So the opportunity that we have here is significant, and I do fully expect that within the next five years India will be a top market in the Volvo financial services portfolio globally.”
Out of all the 44 markets around the world that Volvo Group functions in, eight of VFS offices function in the Asia Pacific region. Of these, four are wholly-owned while the rest are in alliance. Mr. John Rakocy, President – VFS, Region APAC, says: “Coming into India has been a gradual process. We have basically been doing business for six years and we have opened up different businesses at different times. So this was the next step. All the eight markets, here in APAC have been fairly growth-oriented markets, and APAC has been a very strong market growth area for the company in general over the last five-six years. We are going to see positive growth through the entire forecasting period.”
According to company officials, “right now, in terms of our product client companies which we support, India would be the largest and multi-growth oriented market.”
The financial services arm, though is one legal entity, will offer two products, one being Volvo Financial Services, and the other Eicher Financial Services. The range of services offered by the two include loans, leases, insurance tie-ups, maintenance handling and dealer financing, besides offering potential new products.
Mr. Aiyer points out: “Leasing segment is still coming up in India in cars, but we are currently focussing on new units, and later on (we shall expand) to re-manufactured units.”
The customers, both of Volvo and Eicher products, can continue their existing lines of credit with their banks for other business needs while simultaneously enjoying the benefits of facilitation offered by the Volvo Group and VECV.
For VFS, it is not one transaction. According to officials, it is a partnership with its customers. Mr. Aiyer explains: “We want our customers to keep coming back to us and to keep buying Volvo products. When our customer comes to us we believe in being completely transparent on interest rates on the financing part to him and explain to him that while we may not be the best in interest rates at all points of time, we are still there to help him throughout his business and that we are there to understand what he will really need in terms of tailor-made EMIs. So that’s the USP we will bring to the customer.”
The careful consideration after which VFS has decided to go solo in India is up against some stiff competition, no doubt. According to Mr. Rafkin, “We compete here like in every other market. We compete with local banks and financial institutions on a regular basis but we also compete with our peer captive finance companies in terms of support sales for their OEMs. So we have a broad view of the competition in India.”
With their retail volume the world over standing at $1.8 billion, VFS is relying upon the Group’s goodwill with its customers and its USPs like ease of doing business, commonality of processes and KPIs, speed to market, long-term relationship and vast expertise – to succeed in its captive finance venture. They are open to offering their customers and dealers tailor-made solutions.
According to its officials, as of now VFS has New India Assurance as its insurance partner and is part of CIBIL Credit Rating process in India. It hopes to begin its services soon in five other destinations, including Delhi/NCR, Hyderabad, Chennai, Mumbai and Ahmedabad.