Some of Europe’s biggest car makers are looking more and more like retail banks. Renault, Volkswagen and BMW are among those making a push into the business of taking customer deposits.
They say it is a cheaper way to finance car leasing after an unprecedented rise in interest rates made corporate bond issuance – the primary means of funding in recent years – far less attractive.
Car makers’ finance companies can use the deposits they attract to backstop loans to other customers, helping keep sales going. It is a change from the ultra-low rates era, when they were able to sell bonds cheaply to raise funds and use that money for customer loans.
Some car maker accounts require deposits to be left for a certain amount of time, but others have no time limit and are akin to a savings account at a traditional bank.
“In the current positive rate environment, deposits have become significantly cheaper than market funding,” said Jean-Marc Saugier, vice president, finance and group treasury at Renault’s Mobilise Financial Services.
The French car maker started its deposit-taking business in 2012 to diversify its funding, but has been making a big push into banking since last year. It funded nearly half of its car loan programme through deposits last year, up from 35 per cent in 2018.
Volkswagen has also had a banking business for a long time – more than three decades. But the sharp rise in costs for other forms of financing, including corporate bond issuance and asset-backed securities, has made it more important than ever.
The car giant, which recently announced plans to combine its Volkswagen Financial Services and Volkswagen Bank units, has raised interest rates on customer deposits twice this year, to the current 3.1 per cent rate, in a bid to attract more savers.
About 160,000 new accounts have been opened since the start of the year, adding about €8 billion ($8.7 billion) in deposits, according to a representative.
Fellow German car maker BMW also offers deposit accounts through its financial services unit, with rates of up to 3.2 per cent, according to its website. Like Volkswagen, BMW has recently raised interest rates for fixed-term deposits and call money – or savings – accounts, the company said.
BMW has been able to significantly increase its total deposit volume, and deposits play an important strategic role in the refinancing mix of the car maker’s banking unit, a representative said.
Car makers’ efforts to attract deposits comes as they face spiralling borrowing costs on new debt. The yield on a Bloomberg index of European car bonds has risen to 4.23 per cent from 0.29 per cent in the past two years.
RCI Banque, the issuing entity behind Renault’s banking unit, sold €750 million of five-year bonds last month with a yield of 4.95 per cent – a big jump from the 0.62 per cent on debt it issued in January 2022.
“Auto makers are keen to get as many deposits as they can. They have exceptional brand name recognition among depositors in countries like Germany and France,” said Nesche Yazgan, a senior credit analyst at RBC BlueBay Asset Management.
At the same time, savers in Europe do not have as many options as those in the US, where money-market funds provide an easy alternative to traditional banks, she said.
To be sure, car makers will still need to issue bonds despite the growing contribution from deposits. Car companies in Europe sold €8.45 billion in bonds in the region in May, the biggest month for auto debt issuance in six years, according to data compiled by Bloomberg, as they took advantage of good market sentiment to get ahead of coming debt maturities.
The increasing cost of that debt may translate to higher car loan rates for customers, with implications for demand for new cars, according to some analysts.
Still, savers like Pere Domec, a teacher from Lerida in Spain, continue to be attracted by the higher rates offered by some car makers.
He first started investing with Renault’s bank about a year and a half ago, when the rate paid on a Spanish instant access account was around 1.2 per cent. That rate has since jumped to more than 2.6 per cent, he said.
ING Groep, which is active in Spain with its online bank, offers a rate of 1.25 per cent on its savings account.
“After doing my homework, we decided to invest,” Mr Domec said. “There’s no reason in Spain now to stay with one of the big banks that will give you so little for your money.”
FINAL SCORES
Fujairah 130 for 8 in 20 overs
(Sandy Sandeep 29, Hamdan Tahir 26 no, Umair Ali 2-15)
Sharjah 131 for 8 in 19.3 overs
(Kashif Daud 51, Umair Ali 20, Rohan Mustafa 2-17, Sabir Rao 2-26)
WHAT IS A BLACK HOLE?
1. Black holes are objects whose gravity is so strong not even light can escape their pull
2. They can be created when massive stars collapse under their own weight
3. Large black holes can also be formed when smaller ones collide and merge
4. The biggest black holes lurk at the centre of many galaxies, including our own
5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed
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Real Madrid 1
Ronaldo (87')
Athletic Bilbao 1
Williams (14')
The%20specs
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SPEC%20SHEET%3A%20APPLE%20IPHONE%2014
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360Vuz PROFILE
Date started: January 2017
Founder: Khaled Zaatarah
Based: Dubai and Los Angeles
Sector: Technology
Size: 21 employees
Funding: $7 million
Investors: Shorooq Partners, KBW Ventures, Vision Ventures, Hala Ventures, 500Startups, Plug and Play, Magnus Olsson, Samih Toukan, Jonathan Labin
Keep it fun and engaging
Stuart Ritchie, director of wealth advice at AES International, says children cannot learn something overnight, so it helps to have a fun routine that keeps them engaged and interested.
“I explain to my daughter that the money I draw from an ATM or the money on my bank card doesn’t just magically appear – it’s money I have earned from my job. I show her how this works by giving her little chores around the house so she can earn pocket money,” says Mr Ritchie.
His daughter is allowed to spend half of her pocket money, while the other half goes into a bank account. When this money hits a certain milestone, Mr Ritchie rewards his daughter with a small lump sum.
He also recommends books that teach the importance of money management for children, such as The Squirrel Manifesto by Ric Edelman and Jean Edelman.
Pakistan v New Zealand Test series
Pakistan: Sarfraz (c), Hafeez, Imam, Azhar, Sohail, Shafiq, Azam, Saad, Yasir, Asif, Abbas, Hassan, Afridi, Ashraf, Hamza
New Zealand: Williamson (c), Blundell, Boult, De Grandhomme, Henry, Latham, Nicholls, Ajaz, Raval, Sodhi, Somerville, Southee, Taylor, Wagner
Umpires: Bruce Oxerford (AUS) and Ian Gould (ENG); TV umpire: Paul Reiffel (AUS); Match referee: David Boon (AUS)
Tickets and schedule: Entry is free for all spectators. Gates open at 9am. Play commences at 10am
Heavily-sugared soft drinks slip through the tax net
Some popular drinks with high levels of sugar and caffeine have slipped through the fizz drink tax loophole, as they are not carbonated or classed as an energy drink.
Arizona Iced Tea with lemon is one of those beverages, with one 240 millilitre serving offering up 23 grams of sugar - about six teaspoons.
A 680ml can of Arizona Iced Tea costs just Dh6.
Most sports drinks sold in supermarkets were found to contain, on average, five teaspoons of sugar in a 500ml bottle.
It’ll be summer in the city as car show tries to move with the times
If 2008 was the year that rocked Detroit, 2019 will be when Motor City gives its annual car extravaganza a revamp that aims to move with the times.
A major change is that this week's North American International Auto Show will be the last to be held in January, after which the event will switch to June.
The new date, organisers said, will allow exhibitors to move vehicles and activities outside the Cobo Center's halls and into other city venues, unencumbered by cold January weather, exemplified this week by snow and ice.
In a market in which trends can easily be outpaced beyond one event, the need to do so was probably exacerbated by the decision of Germany's big three carmakers – BMW, Mercedes-Benz and Audi – to skip the auto show this year.
The show has long allowed car enthusiasts to sit behind the wheel of the latest models at the start of the calendar year but a more fluid car market in an online world has made sales less seasonal.
Similarly, everyday technology seems to be catching up on those whose job it is to get behind microphones and try and tempt the visiting public into making a purchase.
Although sparkly announcers clasp iPads and outline the technical gadgetry hidden beneath bonnets, people's obsession with their own smartphones often appeared to offer a more tempting distraction.
“It's maddening,” said one such worker at Nissan's stand.
The absence of some pizzazz, as well as top marques, was also noted by patrons.
“It looks like there are a few less cars this year,” one annual attendee said of this year's exhibitors.
“I can't help but think it's easier to stay at home than to brave the snow and come here.”
UAE v Gibraltar
What: International friendly
When: 7pm kick off
Where: Rugby Park, Dubai Sports City
Admission: Free
Online: The match will be broadcast live on Dubai Exiles’ Facebook page
UAE squad: Lucas Waddington (Dubai Exiles), Gio Fourie (Exiles), Craig Nutt (Abu Dhabi Harlequins), Phil Brady (Harlequins), Daniel Perry (Dubai Hurricanes), Esekaia Dranibota (Harlequins), Matt Mills (Exiles), Jaen Botes (Exiles), Kristian Stinson (Exiles), Murray Reason (Abu Dhabi Saracens), Dave Knight (Hurricanes), Ross Samson (Jebel Ali Dragons), DuRandt Gerber (Exiles), Saki Naisau (Dragons), Andrew Powell (Hurricanes), Emosi Vacanau (Harlequins), Niko Volavola (Dragons), Matt Richards (Dragons), Luke Stevenson (Harlequins), Josh Ives (Dubai Sports City Eagles), Sean Stevens (Saracens), Thinus Steyn (Exiles)
Plan to boost public schools
A major shake-up of government-run schools was rolled out across the country in 2017. Known as the Emirati School Model, it placed more emphasis on maths and science while also adding practical skills to the curriculum.
It was accompanied by the promise of a Dh5 billion investment, over six years, to pay for state-of-the-art infrastructure improvements.
Aspects of the school model will be extended to international private schools, the education minister has previously suggested.
Recent developments have also included the introduction of moral education - which public and private schools both must teach - along with reform of the exams system and tougher teacher licensing requirements.
MATCH INFO
Europa League final
Marseille 0
Atletico Madrid 3
Greizmann (21', 49'), Gabi (89')
