Daimler: Bitcoin could solve Africa’s vehicle financing problem

Daimler AG(DAI) found success in India’s emerging auto market, but its plans for expansion into  Africa may rely on digital financing provided by acquisition of mobile payment platform, CashPay.

As the latest wave of globalization takes hold, infrastructure starved markets the world over have begun extensive investment in, what many experts believe, is the foundation of a fruitful economy –modern transportation networks. In the past 10 years, automotive sales in emerging markets, such as South America, Asia, and Africa, have proved more robust than many experts had predicted. Rapidly changing market landscapes and evolving consumer demand are the main drivers of the expanding transportation industry in emerging markets.

German automaker Daimler AG(DAI)’s global strategy has positioned its Asian division to capture value in these rapidly expanding markets. In 2014, the company increased its investment in its Daimler Trucks Asia division by $414 million for the expansion of its commercial vehicle subsidiaries: Mitsubishi Fuso Truck & Bus Corporation (MFTBC) in Japan and Daimler India Commercial Vehicles (DICV). The heart of Daimler’s Asian business model is currently their Chennai automotive factory in India. The facility churns out completely built medium and heavy-duty commercial trucks which are then shipped to Africa and Southeast Asia. “Our Fuso brand is firmly established in Africa and Asia,” said Dr. Wolfgang Bernhard, Daimler Board of Management member, responsible for commercial vehicles. “With the products from our Indian production, we want to continue to grow our sales in these important growth markets.”

To augment its Indian presence, in 2011, the company invested $50 million for expansion of its automotive financial services to the country. “Daimler Financial Services India (DFSI) supports the sales of Mercedes-Benz cars and Daimler trucks as we see a large demand for financing solutions in the market”, said Richard Howard of Daimler Financial Services AG.  Since their initial investment, the company has increased their stake in Indian auto financing to $204 million, a strong indicator of their growth in this area. Currently Daimler Financial Services India finances one in two Daimler vehicles sold.

Success in India has given the company a foothold in the region. Now, Daimler plans to parlay this momentum to penetrate untapped African markets. “We are already present in over 30 marketplaces in Africa and are still expanding both our product range and our service operations network,” said a spokesperson for Daimler. “This is a clear signal that we expect further growth in Africa.” However, many of Africa’s markets are less established than their Indian counterparts, which present unique complications. Despite a very favorable demand environment, the growth of Africa’s automobile industry remains stunted.  “The major problem observed in the automotive sector is lack of adequate financing facilities,” says Eskinder Desta, managing director of Habesha Capital Services Ethiopia. Two billion individuals and 200 million businesses in emerging economies today lack access to savings and credit. Even those with access must often pay high fees for a limited range of products. In market conditions such as these, digital finance could bridge the financial gap. McKinsey Global Institute found that digital currency could provide regional access to an additional $2.1 trillion of loans to individuals and small businesses, as providers gain newfound ability to assess credit risk for a wider pool of borrowers.

With its recent incorporation of digital finance company PayCash into its mobility services, Daimler may be gearing up to leverage finance in their African market. PayCash is a Luxembourg based digital payment platform, offering mobile payment and access to digital currency channels, such as Bitcoin.  Daimler has indicated their strategy for expansion involves efforts to digitize its entire value added chain. “We are able to make distribution routes more direct” The company’s website stated “This allows us to respond more rapidly and specifically to customers’ preferences.” Part of this digitization process involved the incorporation of PayCash into Daimler Financial Mobility Services. Current offerings under the umbrella of Daimler mobility services include Charter Way, a commercial truck rental and leasing program; FleetBoard, a fleet logistics platform for businesses; and TruckStore, Daimler’s used truck exchange. As Daimler seeks to capture value in African markets, shifting its financial mobility offerings may finally be feasible with the assimilation of digital financing into their mobility platform.

With digital currency gaining more mainstream acceptance, firms are beginning to grasp its power to dis-intermediate traditional financial institutions. In addition to streamlining exchange, it is a tool for extending the flow of capital to markets where financial infrastructure doesn’t exist. As established firms hunt for new areas to expand, markets that were previously beyond the reach of free trade, may finally be able to participate in the global economy.