Daimler AG plans to restructure its captive finance unit in India

Auto giant Daimler AG is considering reorganizing and spinning off its captive finance arm in India – Daimler Financial Services India Pvt Ltd (DFSI).

The proposed move comes close on the heels of Daimler AG’s global realignment strategy and its planned spinoff of Daimler Truck later this year. Daimler AG’s Supervisory Board and the Board of Management decided in February to examine the possibility of spinning off the Daimler Truck and Bus business.

It is planned to create two independent companies – one for cars and vans and another for trucks and buses – and to list Daimler Truck on the stock exchange.

The financial services business is also expected to be restructured in line with the realignment strategy. The division of Daimler AG offering financial and mobility solutions, Daimler Mobility, is believed to split into two different financial services companies for its car and van and truck and bus divisions.

Daimler Mobility may concentrate its efforts on Mercedes-Benz luxury cars and vans as well as electric vehicles while the truck financial services arm may focus on lending and mobility solutions for Daimler trucks and buses.

Daimler Financial Services India Pvt Ltd (DFSI), started in 2011 as a 100% captive finance arm to support Daimler vehicles in India, has been providing financing options to customers and dealers of BharatBenz trucks and buses, and Mercedes-Benz cars. As well as leasing, insurance, extended warranties, and others, it offers automotive financial services.

“Daimler Financial Services India is committed to supporting the future dedication in the best possible way, and we will continue to contribute enthusiastically to the sales of desirable luxury vehicles. Currently we are evaluating the local implications of the possible spin-off of Daimler trucks and buses in India,” the Daimler AG headquarters told BusinessLine.

As internal combustion engines rapidly migrate to electric vehicles worldwide, the challenges are different, especially for passenger car companies where the stakes are high. Daimler AG has sought to separate passenger cars and vans from trucks and buses under Olla Kalenius. I am confident (and this is sensible and pragmatic) that Daimler Financial Services will remain as one unit for all of Daimler’s businesses. “Scale helps source costs,” says Shyam Maller, former Vice President of VE Commercial Vehicles.

According to a Crisil report, DFSI’s portfolio stood at *8,181 crores as of September 30, 2020, and it lost Rs 139 crores during the same time.

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