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October 26, 2018updated 29 Oct 2018 4:36pm

Daimler bets on mobility against slowing car finance business

Daimler Financial Services was one of the few divisions in its parent that retained positive earnings guidance, as a bold mobility services strategy tries to offset a slowdown in car financing.

By Lorenzo Migliorato

Daimler Financial Services was one of the few divisions within the Mercedes-Benz parent that retained positive earnings guidance for the end-year, as a bold mobility services strategy tries to offset a slowdown in vehicle financing.

The division reported revenues of €6.2bn (£5.5bn) in the third quarter, up 6.6% year-on-year, but a 5% drop in the total value of new contracts and rising interest rates pushed earnings before interest and tax (EBIT) to €392m, down 23%.

Europe saw a substantial drop in the volume and value of new contracts, as WLTP-induced delays in vehicle deliveries transmitted to other businesses within the carmaker.

Total value of financing originations was down 8% to €7.2bn, particularly due to slowdowns in Germany and Turkey. In the latter, new business dropped a whopping 65%.

Online sales and BMW mobility tie-up to spearhead FS growth

Despite negative guidance for most business lines, Daimler said it expected revenue growth in financial services to pick up again, and for the division’s EBIT to remain around 2017’s €1.7bn.

The carmaker is assuming swift approval of its planned mobility joint venture with BMW Group on part of national competition authorities, which Daimler said had already happened “in some cases”.

The two companies filed the joint venture transaction with the European Commission in mid-September – offering “concessions” in the way of competition, according to Reuters. A first decision by the Commission is expected on November 7.

Daimler Financial Services has also been investing in online capabilities, taking a 20% stake in Heycar, a multi-brand used car portal launched by Volkswagen at the beginning of the year.

“We will utilize new market potential through new and digital possibilities for customer contacts – in particular by systematically further developing our online sales channels,” Daimler said in its full-year guidance.

The financial services business will see head Bodo Uebber depart after next year, and is to rename to Daimler Mobility as part of the carmakers’ business structure overhaul.

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