Daimler, manufacturer of the brand Mercedes Benz, on Wednesday launched Daimler Financial Services for the Indian market, in a bid to provide lending support to buyers of Mercedes Benz cars and trucks. The subsidiary, started with an initial capital of $50 million and set a target of $500 million of contracts.
The company will focus on various range of services including leasing. “From owning a car it is now the right to use a car. In Germany leasing 40 per cent of the cars are on lease and similar is the case in the US,” Chairman of Diamler Financial Services AG Klaus Entenmann told reporters after launching the financial arm, which will be headquartered in Chennai. The new subsidiary has been named as Diamler Financial Services India Pvt Ltd.
Entenmann said leasing will fetch a new class of buyers — used car buyers — for Mercedes Benz while sales of new cars would also pick up.
In the process the Mercedes Benz car dealers will be happy with more business — selling new as well as used cars and generating revenues from their sales and service.
“In the case of lease deals the residual value of a car will be finalised up front. The lessee can return the vehicle after the lease period or buy it off. When the leased cars are returned then the dealers can look at used cars sales as another revenue stream,” Peter Honegg, MD and CEO at Mercedes Benz India Private Ltd.
Sidhartha Nair, MD at DFSI, the volumes in the Indian car leasing market is growing.
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He said the passenger cars in commercial fleets funded by operational leasing which was at 40,000 units in 2009 is expected to touch 100,000 units in 2013.
Mercedes Benz India breached that number in 2008. But with Daimler introducing buses and slated to launch its trucks next here setting up the financial arm could not be delayed any further. The new company will start with funding passenger cars and from next year it will also fund trucks, which will be launched under Bharath Benz brand in India.
Entenmann said around 2.5 million vehicles — cars, vans, trucks and buses — are financed by DFS globally, which makes the company has the largest in the World.
“Two out of five Daimler cars and every fourth Daimler commercial vehicle are financed or leased by us,” said Entenmann heading the $12.8 billion revenue DFS.
The company has tied-up with Pune-based non-life insurer Bajaj Allianz General Insurance Company to offer customised insurance policies to cover the Daimler vehicles.
Nair said the company will also fund Daimler’s dealers will also be funded for their retailing activities including network expansion and investment products.