This article first appeared in The Edge Financial Daily on January 22, 2018

KUALA LUMPUR: Mercedes-Benz Services Malaysia Sdn Bhd (MBSM), the automotive financing arm of Mercedes-Benz Malaysia Sdn Bhd, expects growth in its loan book this year as the luxury carmaker is projecting sales numbers in 2018 to be better than last year.

Mercedes-Benz Malaysia had yet another best-ever year in Malaysia in 2017, with 12,045 cars sold, representing a 2.3% growth over 2016 that was spurred by strong demand from its locally produced limousines.

MBSM financed four out of every 10 vehicles sold by Mercedes-Benz Malaysia last year, boasting a total financing portfolio of RM2.2 billion, it said.

MBSM managing director Mike Ponnaz said the auto financing unit expects the growth momentum of its loan book to continue this year, but he declined to give a target number.

That said, there is no growth without challenges. According to Ponnaz, MBSM had spent the first year of operations in 2012 on building awareness and shaping interest among consumers towards MBSM’s products.

However, it was only after “fine-tuning the products, messages and approaches that we began to see our business gain traction”, he told The Edge Financial Daily in a recent interview.

“As with all types of businesses, we have to look at the opportunities and challenges and then face it. Initially, it was a lot about setting up shop and the team. The market was vibrant and pretty competitive, but we started from a zero base,” he said.

“A lot of efforts were placed into setting up the processes, IT infrastructure and people and more importantly, building awareness. The opportunities for us began only two or three years later when the boom of Mercedes-Benz came along,” he added.

2017 was the fourth consecutive record year for Mercedes-Benz Malaysia, maintaining a 2.3% share of the local premium market.

Ponnaz said today, MBSM has created a solid presence in the local auto financing market even though the company is relatively young when compared with its financing business in other markets in Asia-Pacific, some of which have been operating for 25 years.

But MBSM is not resting on laurels. Ponnaz said the local auto financing market still has plenty of room for growth and areas to improve going forward.

“There will always be challenges, but we have the right mindset and attitude to face those obstacles. We’ve had our issues and had to navigate through, but do we see growth? Definitely. As soon as the portfolio starts decreasing in size, that’s when we start changing our strategy.

“Growth [in MBSM’s portfolio] shows we are contributing towards Mercedes-Benz Malaysia’s sales, which have been growing year-on-year, and shows the acceptance [of MBSM] in the market is higher,” he said.

“There was a time when we were only financing two out of 10 cars in the third year of our operations. Now we’re doing four out of 10.

“But doing more is not something we can do overnight. We still need to develop our products, choose our approaches correctly and stay relevant in the thoughts of our customers,” Ponnaz added.

Of the products offered under MBSM’s umbrella, the three sought-after ones which are bundled under retail are the Hire Purchase Classic, Agility Financing and Lease2Go financing options, with the latter two being the company’s game changers.

“We don’t want to force customers to take up the classic hire purchase method of payment because it’s all we have when in fact, we have other financing options. Our role is to advise and explain what fits best and allow them to pick for their own benefits,” said Ponnaz.

“Our products and services are very much tailored to our target groups. We are part of the Mercedes-Benz family, which means the close relationship that we have with Mercedes-Benz Malaysia and the dealers allows us to comprehend the entire business, opportunities and challenges, which then enables us to understand the market and their preferences better,” said Ponnaz.

“We look at the breakdown of our target groups, their needs and wants, the emotional aspects of choosing a car, the type of financing they prefer … we see ourselves as an enabler to the lifestyle of our customers. The key here is product variety and differentiation,” he added.