Background
Captive Financing for automotive sales in India is a low-margin, high-risk and low-growth vertical. When I took over as MD & CEO in 2019, VW Finance India was no different.
— our growth potential a captive division was limited, as the group itself only had around 3% market share
— substantial capital tied up as a quasi-banking operation with compliance requirements
— high operating costs with 200+ personnel on payroll and heavy IT infrastructure
Something had to change!
Ideation
Transition to a marketplace model
Moving to a fee-based model from an asset-based model would free up around $150m in operational capital and reduce operational risks
Move to a fully-digital workflow
The traditional dealer-driven model is at best a support system and not a standalone scalable growth model
Reduce complexity
By removing the underwriting role, we could free up the heavy operating costs, compliance requirements and complexity.
Solution
To develop a digital marketplace solution that is scalable and universal- either build our own or acquire one.
Roadmap
Identify and acquire a ready-solution with the right tech and fit - KUWY Technologies was eventually chosen.
Onboarding all the stakeholders- Global Board, Local Board, Group Brands - VW, Skoda, Audi, Porsche, Lamborgini, Ducati, SCANIA; their dealer networks; VWFS Team, and open market financiers - Banks and NBFCs.
Ensure a seamless transition into the digital platform
Implementation
Strategic Vision & Leadership: As Head of VWFS, I presented the broader strategic vision to the onboarded startup’s founders and the VWFS team, highlighting synergies, growth potential, and long-term goals to ensure unified direction and purpose.
Negotiating Investment Milestones: I guided the overseas M&A team on negotiation, cultural nuances, and structured investment stages, tying them to specific performance milestones.
Data-Driven Pilots and Pivoting: Initiated a pilot program with 30 dealers across 3 brands in 15 cities, leveraging data insights to test feasibility, gather real-time feedback, and dynamically pivot strategies for optimal results.
Nationwide Rollout: Successfully orchestrated the national rollout of the digital marketplace, incorporating lessons from the piloting and ensuring alignment across all stakeholders.
Challenges
Operational Impediments Due to COVID-19: The pandemic restricted team mobility, creating significant operational challenges. However, the digital-first nature of the offering became a surprising advantage, enabling rapid traction in a short timeframe.
Resistance to Change: Adapting to change and associated insecurities was a huge hurdle for many stakeholders. This was addressed through transparent and persuasive dialogue, extensive trainings and consistent handholding.
Technical Scalability Issues: The startup’s tech initially struggled to handle the scale of a national rollout and the complexity of our offerings. Continuous adaptation and scaling were necessary to meet the demands.
Success
The transition to fee model freed up ~$150m in capital and reduced ~$20m/yr in operating costs, with much lower compliance and complexity.
KUWY became the first fully digital lending platform in the automotive space in the country, and remains the leader.
Achieved 3x of projected revenue in 6months, with over 80% of the dealers adopting the new workflow.
Legacy
Having found success in India with this model, VWFS HQ decided to implement this model as expansion strategy in other markets in Asia/Africa, and I was tasked to lead the change.