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16 December 2019

China’s BAIC mulls raising Daimler stake to almost 10 per cent

Daimler has had concerns that such a large Chinese ownership stake would increase scrutiny on the company by the US Committee on Foreign Investment (CFIUS).

Bloomberg/Alex Kraus

BAIC Group is considering lifting its stake in Daimler to as much as 9.9 per cent, strengthening Chinese ownership of the Mercedes-Benz maker as Germany gets drawn deeper into global trade tensions, reported Bloomberg.

The move would put almost 20 per cent of Stuttgart-based Daimler into the hands of two major Chinese owners. Zhejiang Geely Holding Group, owned by billionaire Li Shufu, bought a 9.7 per cent holding last year.

State-owned BAIC, which last reported a five per cent holding in Daimler, has also raised the prospect of taking a seat on the supervisory board. Geely has no board representation.

Gaining a second anchor shareholder could benefit Daimler, which has seen profit margins pressured from hefty investments into electric mobility. Potentially, the move could ease the way for the German manufacturer to lift its 49 per cent stake in its main Chinese joint venture with BAIC.

Trade tensions involving the US and China have already whipsawed German carmakers. China’s ambassador in Berlin underscored the strains by bringing up car sales as he threatened to retaliate against Germany if it goes along with US demands to exclude Huawei Technologies as a supplier of 5G wireless equipment.

Daimler Chief Executive Officer Ola Kallenius and BAIC chairman Xu Heyi are in direct contact over future co-operation, the people said.

Hubertus Troska, Daimler Management Board Member for China, said, “We welcome long-term oriented investors, China is and remains a strategically important market for us.”

Troska Asked whether Geely—which owns Volvo Cars and is the biggest shareholder in truck maker Volvo AB—or BAIC might get a seat on the supervisory board Troska said that this would be for the shareholder meeting to decide.

Speculation about BAIC upping its stake in Daimler was fuelled last month by a filing saying HSBC Holdings has built a position of more than five per cent in the German carmaker through stocks and instruments.

In July 2019, the lender helped BAIC building its initial stake in Daimler and the Chinese carmaker recently refinanced a $2.44 billion loan.

The world’s bestselling luxury-car maker targets a margin of at least four per cent at the main Mercedes-Benz cars unit next year, roughly half of what French mass-market manufacturer PSA Group generated in H1 2019.

BAIC’s third-quarter earnings provided a fresh reminder of the Mercedes-Benz joint venture’s vital importance as its profits and cash help stem losses at the Chinese manufacturer’s domestic brand and a venture with Hyundai Motor Company.

RELATED STORIES: Mercedes-Benz BAIC Group US-China trade tensions Zhejiang Geely Holding Group





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