China’s BAIC has bought a 5 per cent stake in Daimler for about €2.5bn in a move analysts said was aimed at cementing the carmaker’s partnership with the German luxury automotive group and preventing rival Geely from undermining the alliance.
BAIC chairman Xu Heyi said in a statement that the investment was intended to strengthen the company’s ties with Daimler, which has held a stake in the Chinese carmaker’s Hong Kong-listed arm, BAIC Motor, since 2013.
Chinese carmaker Geely, which owns Volvo Cars and Lotus, acquired a 9.69 per cent stake in Mercedes-Benz-manufacturer Daimler for $9bn in early 2018 in a sign of the group’s global ambitions.
“BAIC sees Geely as a threat. The joint venture between Daimler and BAIC is the core of the group’s business,” said John Zeng, managing director of research group LMC Automotive Shanghai.
China’s passenger vehicles market, the largest in the world by sales of new vehicles, shrank last year for the first time since the 1990s because of a reduction in buyer subsidies and weak consumer confidence.
Sales have continued to decline in the first half of 2019. But luxury foreign brands have been less affected by the downturn than cheaper marques, making Chinese manufacturers increasingly dependent on foreign joint ventures for profits.
Mercedes-Benz sold more than 650,000 cars in China last year and just under 350,000 in the first half of 2019.
Although BAIC manufactured Daimler’s combustion engines in China, Geely’s involvement with the German carmaker represented a long-term threat, Mr Zeng said.
Geely and Daimler formed a smart car joint venture in March, which will build electric Smart cars in China to be sold globally. (more…)