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. Last Updated: 07/27/2016

Daimler Sets Up Banking Unit to Cash In on a Surge in Sales

Auto giant Daimler said Wednesday that it had set up a banking services unit in Russia, making it the first foreign, premium carmaker to launch its own financial operations to cash in on the car sales boom here.

"With the entry of the Daimler bank, we will continue active growth," said J?rgen Walker, chief executive of Daimler Financial Services.

The company hopes to boost its contract volume to 400 million euros ($580 million) in the medium term, from 80 million euros this year, Walker said.

He said the company expected that one in three of its vehicle sales in the country would be on credit.

Daimler has had leasing and insurance operations in Russia since 1999.

Citing a market research study, Walker said customers who financed or leased their cars replaced them more often, chose cars with higher-quality equipment and were more loyal to the brand. "Because a bank doesn't care what it finances," he said.

Daimler has previously sold its cars through two banks in Russia and will continue to do so, said Frank Hieke, general manager at the company's Russian leasing unit, Leasing Avtomobili.

Daimler will offer an interest rate of 9 percent for euro and dollar loans and 11 percent to 13 percent for ruble loans, Hieke said, adding that the conditions essentially would not differ from those offered by the two banks or from the rest of the market.

Automotive financing is a relatively new concept in Russia, and foreign carmakers currently finance sales in partnership with local banks. Toyota was the first foreign carmaker to launch its own local financial services in September.

Despite Daimler's recent divorce from Chrysler, its banking unit will also finance purchases of Chrysler, Jeep and Dodge models, the company said. A number of other foreign carmakers in the country, including BMW, have said they also plan to roll out financial services in the near future.