Auto Special: Financing key to Daimler's world strategy

Editor's note: During the weeklong Beijing auto show that began on April 23, Klaus Entenmann, global chairman of the Board of Management of Daimler Financial Services AG, shared his insight on the automotive financing business with China Daily.

What are your thoughts on the general development of financial services in the automotive sector?

In fact, the development has been very positive. If you look at Europe, America or Asia, an increasing number of customers enjoy the support of financial services providers when purchasing a car or a commercial vehicle.

The results of Daimler Financial Services clearly reflect that. We achieved a triple record in 2011. Contract volume, new business, and earnings before interest and taxes all reached new peaks.

Right now, there are 2.6 million vehicles on the roads worldwide whose owners have benefited from our services.

We already finance or lease more than 40 percent of all Daimler Group vehicles. And I am convinced that the contract volume will further increase over the coming years.

How do you explain this upward trend?

For one, the automotive business itself is still very much a growth business. The year 2011 saw an all-time high of global automotive sales.

So, naturally, the amount of financial services related to these vehicles has grown as well. This does not just include financing in the classical sense. We are also talking leasing, insurance or fleet management. The latter helps customers to organize large fleets of cars and commercial vehicles as efficiently as possible.

Why does it make sense for a car company to offer financial services in the first place?

Actually, financial services fit into Daimler's portfolio just as well as our S-Class or our Sprinter van.

Studies show that customers who lease or finance their vehicles through the company are much more loyal to their brands. And they also more frequently invest in new vehicles and high-end equipment packages.

So, you might say that they get more fun out of their cars.

Of course, we can also present a lot of advantages for our dealers. As Daimler Financial Services, we see ourselves as their partners and do our best to support their success.

We help them finance their inventories, offer special insurance solutions to protect their business or help them to update their showrooms.

What's more, offering our insurances to customers helps our dealers to stay in touch with the customer and secure business after sales.

In sum, everybody profits Daimler, our dealers and of course our customers.

What role do automotive financial services play in China?

An increasingly important one. China is already the biggest market for cars and trucks in the world today. And it will keep growing.

So, it is no surprise that this country presents significant opportunities for us, just as Asia does in general.

Daimler plans to sell over 300,000 passenger cars in China in 2015, and Daimler Financial Services will support these efforts by offering innovative products and services customized for the Chinese market.

Do you mean you do not just use the solutions you have already developed for other markets?

Not necessarily. Of course, we leverage the experience and best practices of our global organization.

At the same time, you could compare automotive financial services to a catalyst in a chemical reaction. Not all substances automatically react with each other. But if you find the right enabler, it will bring along the effect you wish for.

Likewise, we enable the step from our customers just dreaming of a car to them actually realizing that dream sooner.

And just like you need the right ingredient to facilitate a certain chemical reaction, our financial services need to be adapted to the specific needs and preferences of customers in a certain country.

So, what is the result of finding that perfect chemistry in your business?

Very simple: happy customers. And I am sure an increasing number of them will be Chinese.

Think about it: In the past three years alone, the number of our financial services customers here increased eight fold.

In 2011, our contract volume in China rose by 93 percent to 1.8 billion euros ($2.37 billion) at the end of the year.

However, the proportion of financed and leased vehicles is still a lot lower here than it is in Europe or the United States.

Why is that?

There are mainly historical reasons. In the past, cars were mostly bought by people who simply did not need financing solutions.

But as various customer focus groups confirm, the mindset of Chinese customers toward cash management are fast changing.

More and more customers are looking to financial services solutions as a wise decision, paying for a portion of the vehicle instead of entire vehicle, so they can reinvest the rest or have a better cash flow.

I am convinced that as this trend continues, the demand for financing and leasing will increase as well, especially since we continue to strive for providing industry-leading products and services.

(China Daily 04/26/2012 page15)