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. Last Updated: 07/27/2016

Toyota Opens Its Own Banking Unit

VedomostiA customer examining a Toyota car at a Moscow showroom. Buyers will now be able to get loans from the carmaker.
Toyota announced Monday that it had set up a banking services unit in Russia, making it the first foreign carmaker to launch its own financial operations to capitalize on the car sales boom.

"Russia is a really young market for automotive finance. That's why we think there's an opportunity for further growth," said Olaf Neitzsch, head of Toyota Kreditbank's representative office.

Automotive financing is still a novel concept in Russia and foreign carmakers currently finance sales in partnership with local banks.

Toyota has overtaken premium carmakers DaimlerChrysler and BMW, which also previously disclosed plans to establish banking operations in the country.

Toyota, which will issue consumer loans to finance sales of both the mass-market Toyota and premium Lexus models, hopes its financial division will help boost sales in the country.

Neitzsch declined to say how many cars the company aimed to sell on credit. Gennady Belyukin, CEO and vice president at Moscow-based Toyota Bank, said the company currently sold between 30 percent and 40 percent of its cars on credit and added that he hoped the bank would allow for the figure to grow.

Toyota, which sold around 72,000 Toyotas and 6,946 Lexus units in the first six months of this year, will offer an interest rate of 9 percent for euro and dollar loans and 11 percent for ruble credits.

By contrast, Ford offers loans in partnership with several local banks at 4.9 percent interest.

But Neitzsch said his company's interest rates were in line with market standards and will vary according to general market trends.

"All banks in Russia, they operate under certain conditions of the market," he told reporters.

Sergei Ovsiyenko, an automotive expert at Accenture, said the company could afford to charge relatively high rates because sales would still be robust amid the automotive sales boom.

"They are simply making money," Ovsiyenko said.

In Germany, more than 40 percent of cars were sold with the help of loans last year, the company said in a statement. In 2006, Toyota Kreditbank's net profit totaled 37 million euros ($51 million).

Neitzsch said that by providing loans, Toyota would stand out from its competitors because customers would get a "one-stop shopping experience."

Toyota plans to open 16 financing outlets in all of the company's Toyota and Lexus dealerships in Moscow by year's end and will enter St. Petersburg in 2008. It has already opened two financing outlets in the upscale Rublyovka neighborhood just outside Moscow.

Toyota Bank is 99 percent owned by Germany's Toyota Kreditbank. Germany's Toyota Leasing holds the remaining 1 percent. It received its Central Bank license in June.

Ksenia Klimushina, a spokeswoman for BMW, said Monday that the company would probably open its bank next year. It is now in the process of registering the lender and is hiring employees, she added.

Tatyana Mervitskaya, head of the financial services department at DaimlerChrysler's leasing arm in Russia, confirmed company plans to open a financial unit by year's end but declined to elaborate.