Hyundai Capital America’s Brutti talks growth through innovation

Hyundai Capital America is focused on growing through innovation, product and portfolio diversification, and careful consideration of the competitive landscape. The captive is among the most innovative in the market, Chief Executive Marcelo Brutti told Auto Finance News during a fireside chat at Auto Finance Summit East 2024 in Nashville, Tenn. “Our products, our designs [are innovative. . We're all in on EVs,” he said. “We have sister companies that are also innovating around mobility in general: autonomous driving ... robots [and] hydrogen trucks.” [caption id="attachment_58341155" align="aligncenter" width="1024"] Royal Media CEO JJ Hornblass (left) joins Hyundai Capital America CEO Marcelo Brutti in a fireside chat at Auto Finance Summit East 2024 (Photo/Jeremy Harris Stills + Motion) [/caption] Brutti leads the captive’s retail and lease portfolios supporting the Hyundai, Kia and Genesis brands along with floorplan financing and insurance. . HCA has 1,600 full-time employees along with 800 contractorsand vendors the captive works with, he said. The CEO leans on more than 30 of industry experience to inform his leadership, Brutti said during the May 2 session. “I get to implement learnings from legal, technology, risk, finance, sales, customer service across different products,” he said. “In the captive world, you tend to be more simplistic around what you do in terms of products. . Coming from banking, having that experience, is helping us to evolve at HyundaiCapital America in terms of how we do things.” Hyundai is focused on innovation, leaning heavily into EVs, mobility and hydrogen-powered vehicles, while the captive is focused on a diversified strategy for growth and innovation, Brutti said. “I created a five- to seven-year strategy. . I want to grow the captive, our balance sheet, our operating income,” he said. “We need to innovate in all aspects of the business and diversify our businesses , sources of revenue and risk to have responsible growth.” "We need to innovate in all aspects of the business and diversify our businesses." -- Marcelo Brutti, HCA Hyundai Capital America was the ninth largest auto lender by outstandings at yearend 2023 with a portfolio of $55.3 billion, up 18.9% year over year, according to the latest Big Wheels Rankings data. . HCA originated $29.2 billion in s and leases in 2023, an increase of 71.8% YoY. AFN spoke with Brutti about the captive’s growth strategy, EV financing and technology adoption. . What follows is an edited version of the conversation. Auto Finance News : The Federal Reserve held rates steady again this month. . What are your thoughts on how interest rates are influencing the auto finance market? Marcelo Brutti: We have two sides to this argument. . When we went and talked to the rating agencies last year and we talked to our biggest lenders — we borrow a lot from banks. . They all thought we were going to have three or four rate cuts this year. I am an economist, so my own views are a bit more conservative. . In my 2024 plan, I had no rate cuts. . It was an outlier view in the industry, my internal treasury team and our global headquarters’ view. . The U. .S. economy is extremely resilient. . Everything you throw at it, still it’s growing and it’s hard to turn the ship around. . Inflation is not that easy to tackle. Optimistic plan, we would have two rate cuts in the year, at the end of the third quarter and in the fourth quarter. . We never have a single plan. . I always like to have multiple simulations so as not to be surprised during the year. . My view on interest rates is that if anything happens, it will happen in the fourth quarter. Rate increases would worry me because we don’t want to go backward. . It would throw a bit of a wrench into the global economy. . High rates are a big headache in the bank and captive world. . To offer good rates to our clients, our OEMs must buy down more rates and offer incentives. We have two brands that compete with each other, and we serve them both. . They have different go-to-market strategies. . We work with them weekly to track the programs, the sales, our finance penetration and what is and isn’t working. AFN : What are your thoughts on the competitive landscape and the role automation plays in the growth of the captive? MB: Banks have pulled back over the last couple of years; that’s no surprise when dealing with high interest rates. . The auto business isn’t the most profitable business within the banking world. . This is the cycle I’ve seen during the past 30 years. We don’t compete with banks. . We have had between 50% and 70% penetration with our OEMs throughout the years. . We use banks to be sure we can help our OEMs. . Our reason for existing is to support OEMs to help them grow and do what we can without jeopardizing our long-term financial health. " Our reason for existing is to support OEMs to help them grow." -- Marcelo Brutti, HCA That's where innovation and technology come into place. . Since I joined, we have implemented touchless originations and have low- to mid-80% auto decisioning and 90% e-contracting. . We are up to 40% e-funding and we’re going to get to mid-50% before the end of the second quarter. . Before, if you had these spikes in volume, you had to hire 100 to 150 more people. . The beauty of technology is it lets you scale up and down easier. AFN : HCA began financing hydrogen-powered trucks last year. . How did HCA build its risk model for hydrogen vehicles? MB: We were the first company to offer financing for hydrogen trucks for commercial use. Hyundai Group produces hydrogen trucks. We went through our due diligence. . The process would take us four or five months; I told the team they had two weeks. . We had all the data and we had all the information and they delivered. I also told them as a risk guy, we are not going to cut corners. . We need to do a full assessment. . We need to make sure that we can support these short-term and long-term. . We need to understand what the value is of those trucks. . What is going to be the residual value? What do we do with them? Who's going to support the warranty on those? Do we have parts? The biggest idea was prioritization and focus. AFN : How is HCA supporting the sales and financing of EVs? MB: We are growing [EV sales] at 20% to 30% year over year. . If there is an area where we become a critical strategic partner as a captive to the OEMs, it’s EVs. . We do more than 50% lease when it comes to EVs. We partner with OEMs closely to understand the life of the product, the life of the battery, the replacement cost and residual value. . We have our own residual value models because we know the product better than anybody else. We’ve started getting some of those cars back from three-year leases and we know where the market is. . The biggest disrupter to the market is Tesla when they cut prices by 20%. . We didn’t cut prices by 20% so our residual values still hold. Hyundai Motor Group is investing $50 billion in the next few years in EVs. . We have doubled down as an OEM and as the captive, we will support them. We'll also partner with them to make sure that we have the right products for the right clients. . The profile of an EV client is better than a luxury client. . Their FICO, income, household and education, it’s better than a luxury car client, so it’s easy to lend to them. . It’s more of a residual value question, but from our side we don’t see a problem yet. My vision is that we're going to be the leader in financing freedom of movement. . Whatever the customer chooses, either to drive an internal combustion engine vehicle or an EV. . If they don’t want to drive, we’ll have autonomous vehicles, or if they don’t want to own a vehicle, they can subscribe to a vehicle. The Big Wheels Rankings are now available as a component of the relaunched Big Wheels Data Service, which includes an array of datasets on underwriting, volume, pricing and capital. . The rankings tabulate the Top 100 auto lenders and lessors by originations and outstandings. . See BigWheelsData for details.

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