Daimler Financial Services, the financial services arm of auto giant Daimler (DAI), has opened two new companies in the UAE – Mercedes-Benz Finance Middle East and Mercedes-Benz Leasing Middle East – in order to boost slackening sales in the region. This has made Daimler the first automaker to have its own finance and leasing companies in the oil rich country.
Both the financial services companies will offer loans and leasing deals to customers of new and pre-owned Daimler vehicles that will comply with Islamic law or Sharia. The Islamic law prohibits companies or persons from charging or collecting interest fees when money is lent or accepted or invested in businesses, goods or services such as pork, alcohol or gambling that are contrary to its principles.
This creates difficulty for the financial services companies to operate. Daimler’s interest in the UAE was revealed when Abu Dhabi’s Aabar Investments PJSC bought a 9.1% stake in the company for €1.95 billion ($2.7 billion) in March this year. This has made Aabar the largest shareholder of Daimler.
Later, in July, Daimler also sold 40% of its stake in California-based electric carmaker Tesla Motors to Aabar. Aabar Investments’ biggest stakeholder is International Petroleum Investment Co., owned by the Government of Abu Dhabi. Daimler’s partnership with Aabar was aimed at undertaking several joint strategic projects including the development of electric vehicles to reduce CO2 emissions.
The partnership is also looking forward to undertake other strategic moves in the future such as the development of more battery systems, electric-drive systems and other systems as well as the establishment of a training centre in Abu Dhabi to educate young talent to be absorbed in the automotive industry. We continue to recommend the shares of Daimler as Neutral.
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