Daimler Invests in Mobility for Boon in Financial Services Division

Daimler Financial Services is looking to grow its portfolio by more than 5.5% through 2020, largely driven by its investments in mobility, according to the company’s second-quarter earnings report.

The OEM intends to spend 15.2 billion Euros on the development of mobility in 2017 and today the company serves 14.5 million people worldwide through a number of services including, Car2Go, Croove, and MyTaxi.

“Mobility will become more and more multi-layer over the next few years, and the potential for our business is high,” Dieter Zetsche, Daimler’s chief executive and head of Mercedes-Benz, said on the earnings call. “What is clear, however, is that a good foundation is required to scale up new ideas.”

Daimler Financial Services originated 134.2 billion Euros worth of auto contracts worldwide in the second quarter, up 1% compared to the same period the year prior. In the Americas specifically, growth was more muted with originations topping 51.3 billion Euros for a 0.8% increase. The company does not break out U.S. originations; however, Mercedez-Benz Financial Services had $13.4 billion in originations at yearend 2016, according to Big Wheels Auto Finance 2017.

Meanwhile, credit losses year-to-date sit at 0.2% of the overall portfolio — seven basis points lower than yearend 2016. That figure matches the rate of credit losses Daimler experienced in 2015, which was the lowest since at least 2003 (data from earlier years was not immediately available).

Depreciating used-car values have started to impact other financial institutions across the industry, and one analyst on the call questioned how Daimler’s investments on diesel vehicles will impact the lender going forward.

“When I’m looking to our diesel business within passenger cars, the fact is that we are selling today more cars with diesel engines than we did a year ago,” Zetsche said. “We are following third-party observations, and up until today we have no indication of any change of the current situation.”