Volkswagen Prepares 800 Million Yuan Asset-Backed Debt Sale in China
Volkswagen AG is arranging an 800 million yuan asset-backed securities issue in China, backed by auto loan receivables from its financial services arm, as Chinese car sales and financing demand continue to expand.
Volkswagen AG is preparing to issue 800 million yuan (about $128 million) in asset-backed securities in China, according to a person with knowledge of the matter. The notes, due August 2020, are being arranged by China International Capital Corp and are backed by automotive loan receivables from Volkswagen Financial (China) Co., a subsidiary of Volkswagen Financial Services AG.
This move follows similar transactions by Ford and Toyota, as international carmakers look to tap into China’s growing appetite for auto loans. The portfolio behind the Volkswagen deal includes 13,696 loans, with a total balance of 799.7 million yuan, according to Fitch Ratings. The loans are secured by vehicles from across the Volkswagen Group’s brands, including VW, Audi, Porsche, Skoda, Bentley and Seat.
Rising demand for auto finance in China
China’s car market has seen rapid growth in both sales and consumer financing. As more buyers turn to loans to fund vehicle purchases, auto finance companies have sought additional ways to fund their lending. Asset-backed securities allow lenders to recycle capital by selling off portfolios of loans to investors, freeing up cash for further lending.
According to Moody’s, the expansion of auto sales and loan volumes in China is driving demand for these types of securities. The Volkswagen deal is structured to appeal to both domestic and international investors, reflecting the maturing of China’s financial markets and the growing sophistication of its consumer credit sector.
Scope of the loan pool
The underlying asset pool for the Volkswagen notes is diversified across the group’s brands, not limited to just Volkswagen-badged vehicles. This broad base reduces risk for investors by spreading exposure across different models and customer segments. The inclusion of premium brands such as Audi, Porsche and Bentley is likely to be viewed favourably by the market.
International context and previous deals
Volkswagen’s move comes as other major carmakers have also tapped the Chinese asset-backed securities market. Both Ford and Toyota have completed similar issues, seeking to fund growing auto loan portfolios as car sales rise. The trend reflects the broader shift in China from cash purchases to financed vehicle sales, a change that has underpinned the rapid expansion of the country’s auto finance sector.
For Volkswagen, the debt sale provides a way to support continued lending growth in China, where it remains one of the leading foreign carmakers. The company’s ability to raise funds through securitisation indicates confidence in the credit quality of its Chinese customer base and the stability of the underlying loan assets.
Further details on the pricing and investor response to the Volkswagen notes are expected as the sale progresses.
