Covid-19: automotive market players talk about the role of captive finance and new priorities in the recovery phase

With credit risk on the rise, significant renegotiation plans with customers will be needed as well as the ad-hoc management of credit lines granted to car dealers, which after more than two months of lost sales, face one of the most critical liquidity crises ever experienced. What’s the best way to recover?

The roundtable was organized by CRIF, in collaboration with Nomisma, and moderated by Arianna Lombardo, CRIF Global Automotive Industry Lead, and Claudio Sangiorgi, CRIF Business Development Manager EMEA Markets. The live-streamed event showed how the impact of the health emergency has resulted in economic repercussions with different levels of intensity across Europe, with varying effects on different types of business.

As Gabriele Guardili, Head of Pre-Sales at Scania Finance pointed out, the leasing truck and commercial vehicle business has not been significantly impacted by the COVID-19 effect.  However, the fact remains that transport companies, some of which may also be interested in expanding their fleet, currently have limited liquidity due to the lack of payments from customers.

The case of car rental is different, as Hadrien Boisseau, CFO of ALD Nortics explained. In northern Europe, there has not been a significant slowdown; on the contrary, a strong recovery in long-term rental in the private segment is expected, to the detriment, at least in the short term, of car sharing arrangements. Less rosy, however, are the prospects for recovery in the fleet management segment, due to the well-known liquidity shortages in this sector.

On the other hand, more critical issues are evident in the car loan and dealer financing segment, as the expected increase in default rates, particularly in the SME segment, will require extraordinary measures to contain the cost of risk as well as a change in approval policies, as Massimiliano Gasparotto, COO of BMW Bank Italia explained. The adoption of alternative credit rating tools, with particular reference to joint-stock companies, could undoubtedly be a winning factor.

And dealers? They will need support, because the state of dealer liquidity, which was already critical prior to COVID-19 and has since worsened, will require a new strategy, based on deferred payments, a change from a push to pull model, and daily monitoring of financial positions. 

“Despite this, we will continue to invest in the automotive finance segment, with the hope that the expected government incentives will promote recovery”, said Filippo Martini, Deputy CRO of BNP Paribas Personal Finance.

Finally, what lessons have we learned from the coronavirus emergency?

Watchword: digitalization, to ensure business continuity and address the current challenges of proximity to customers by overcoming physical distances.

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