TFA funding supports business growth and auto market evolution

Toyota Finance Australia is a familiar name in the Australian corporate bond market. Its Sydney-based treasurer, Ian Pang, reveals the avenues of opportunity available for the business as it provides the funding support for a business that continues to grow, evolve and add diversity of operations.

Toyota Finance Australia (TFA)’s funding approach in Australia is well established, including a presence in the bond market that has been on an upward trend over time. As TFA’s new treasurer, is there any reason to expect this strategy to change?

Though TFA is always open to engaging with investors on new funding opportunities and markets, domestically and offshore, our core funding strategy remains unchanged. Our approach is to ensure diverse, stable and cost-effective funding with an investor focus in mind. This means maintaining an active presence in the domestic market through benchmark issuance.

TFA returned to the domestic bond market in March 2023, successfully issuing A$500 million (US$331.1 million) of three-year and A$125 million of five-year bonds. This was followed by our A$800 million deal in September 2023, which is our largest domestic transaction yet.

The Australian domestic bond market and the support of our investors in this market are critical to the success of TFA’s funding strategy. Therefore, TFA is committed to maintaining its presence in this market and to growing its relationship with investors.

Toyota Australia launched the KINTO business – a hybrid of car hire, car share and car rental – in 2021. How is this business positioned and are there any funding implications?

The KINTO business is another step in Toyota’s journey to transform from a car manufacturing and financing company into a comprehensive mobility provider. KINTO allows customers to rent a range of Toyota vehicles, from an hour to a year, in more than 200 national locations, all from their smartphone. Joining, booking, unlocking and payment are all done digitally from the KINTO app.

KINTO combines car share, rental and monthly subscription into one flexible and convenient service, with a 100 per cent hybrid passenger fleet and many locations available 24/7. We hope the continued expansion of the KINTO fleet will become a new source of growth for TFA’s book.

Recently, the landscape of securitised auto financing in Australia has changed quite significantly with the exit or changing of hands of the SMART and Crusade books. Do you expect this to have implications for TFA in funding markets?

No. TFA is well positioned in Australian auto financing due to its strong credit rating, which allows TFA to source funding competitively from the senior-unsecured bond market.

Globally, Toyota Finance has been a pioneer of green auto asset-backed securities (ABS). Do you have any aspirations for green ABS or green-bond issuance in Australia?

A green-bond framework is on TFA’s roadmap but remains aspirational for the near term. We are excited by recent announcements by Toyota Motor Corporation in the battery electric vehicle (BEV) space. These include an increase and shift in expenditure into development research, particularly into next generation battery technologies, and plans to ramp up production of BEVs. In the near term, we are eagerly awaiting the release of the bZ4X in Australia.

Toyota has historically funded via securitisation globally but not in Australia. Is local ABS an option?

TFA has well-established private securitisation programmes and has frequent discussions with its banking partners on these transactions. We also continue to invest in our securitisation system capabilities. TFA aspires to enter the public securitisation market in Australia in the longer term.

Does the higher interest rate environment mean revised growth aspirations for TFA’s lending book in Australia?

TFA has continued to grow its lending book despite the more challenging economic backdrop, with assets increasing to A$27 billion in FY23 from A$25 billion in FY22. TFA also continues to invite new vehicle brands to its strategic alliance, including the recent addition of Suzuki to Australian Alliance Automotive Finance in 2022. Finally, TFA is always developing new finance products and technologies that enhance the customer experience.