General Motors Company (GM) received approval for its industrial bank application in January, enabling it to accept FDIC-insured deposits into savings accounts. This strategic move is aimed at enhancing GM’s funding capabilities, particularly in light of rising vehicle prices, which average around $50,000 in the U.S. The approval comes at a time when approximately 50% of auto loan borrowers are choosing loan terms longer than six years, according to LendingTree.
Ford Motor Company (F) has also gained conditional approval to establish its own industrial bank, which will finance various vehicle-related purchases. Meanwhile, Toyota Motor Corporation (TM) has operated an industrial bank, Toyota Financial Savings Bank, since 2004, offering traditional banking products to eligible Toyota and Lexus dealers and employees.
GM’s new banking structure is expected to complement its existing funding channel and gradually lower funding costs, potentially enhancing its overall debt profile over time. Currently, GM’s stock has outperformed the Zacks Automotive-Domestic industry, boasting a 23.3% increase compared to the industry’s 1% growth.
