In a bid to boost sagging sales, Daimler Financial Services AG, the financial services arm of auto giant Daimler AG, has open two new companies in the Middle East that will finance cars under the rules of Islamic law.
Mercedes-Benz Finance Middle East and Mercedes-Benz Leasing Middle East will offer loans and leasing deals to customers of new and pre-owned Daimler vehicles that comply with Islamic law or Sharia, according to the company. The move will allow Mercedes dealers in the United Arab Emirates to offer a new range of financial services to their Islamic customers.
Islamic law prohibits its followers from charging or collecting interest fees when money is lent or accepted, or investing in businesses, goods or services such as pork, alcohol or gambling that are contrary to its principles. There are several methods of investing that comply with Islamic law. For example, instead of offering a loan with interest to buy a car, a bank could purchase the car outright and sell it back to the buyer at a profit.
High Strategic Importance
The first automaker to have its own finance and leasing companies in the UAE, Stuttgart's Daimler is making a bet on an increasingly wealthy, oil rich country. "Our presence in the United Arab Emirates is of high strategic importance for Daimler Financial Services," said Jürgen Walker, Daimler Financial Services chief executive, in a statement. The two companies are a joint-venture between Daimler Financial Services and Mercedes-Benz distributors in the UAE.
In March of this year, Aabar Investments, based in Abu Dhabi, bought a 9.1 percent stake in Daimler worth €1.95 billion.
In 2008, Daimler sold 7,800 cars and 3,100 commercial vehicles in the UAE. The company said further that it hopes to achieve a contract volume of more than €300 million in the UAE within five years.
Meanwhile, Daimler's business is showing small signs of improvement. The concern, made up of Mercedes-Benz, but also Smart and Maybach cars, sold 114,300 vehicles in September. That figure is down 6.5 percent from the same time last year, but up when compared to recent months.
"We observed in September a positive sales trend," said Joachim Schmidt, head of sales and marketing at Mercedes-Benz in Stuttgart on Wednesday.