China’s Geely takes 3pc stake in Daimler with an eye on electric car venture with Mercedes parent

The German carmaker had rejected an offer by the Chinese carmaker to buy a 5pc stake last year

PUBLISHED : Wednesday, 07 February, 2018, 4:11pm
UPDATED : Tuesday, 03 July, 2018, 8:22pm

Chinese carmaker Zhejiang Geely Holding Group has reportedly spent US$3 billion for a stake of just under 3 per cent in German carmaker Daimler as it aims to become a global player.

The shares, which were bought on the secondary market according to Reuters, provides further evidence that Geely, controlled by billionaire Li Shufu, is keen to access Daimler’s electric car battery technology and wants to set up an electric car joint venture with Mercedes-Benz parent in Wuhan, capital of central China’s Hubei province.

Daimler currently has a joint venture with Chinese carmaker BAIC Motor.

The moves comes as information technology giants like Apple and Google are making strong inroads into the electric and self-driving car market.

Geely would not comment on the issue.

“Investing around the world in quality assets would help Geely to transform itself into a global player,” said Yale Zhang, managing director of consultancy Automotive Foresight. “But it remains to be seen whether Daimler wants to establish a joint venture [with Geely].”

The Chinese company’s offer to buy a 5 per cent stake in Daimler through a share placement was rejected by Daimler last year.

But the German company said it welcomed new investors with a long-term interest in it.

An official with a Chinese auto part supplier, which has business ties with Geely, said the company remains determined to improve its management capabilities as it aims to evolve into a powerful global player.

Geely, which bought Volvo Cars from Ford in 2010, has been reinforcing its go-global strategy with active purchases of foreign assets – including an 8.2 stake of Swedish truck maker Volvo, 49.9 per cent of Malaysia carmaker Proton and 51 per cent of iconic British sports car marque Lotus Cars – in 2017.

The Chinese carmaker’s successful efforts to marry European styling and technology to Chinese manufacturing capability have boosted its profitability and enriched its product offerings.

Volvo’s owner Geely aims to sell 500,000 units of its new Lynk brand vehicles by 2019

In late 2017, Lynk & Co, the mid-priced car brand co-developed by Geely and Volvo hit the market with strong orders from customers as the Chinese carmaker got off to a rosy start to take on established market players such as Audi and Lexus.

Hong Kong-listed subsidiary Geely Automobile Holdings saw its shares jump surge 272 per cent in 2017. They dropped 0.9 per cent to HK$22.1 (US$2.83) on Wednesday afternoon, 18.5 per cent lower than last year’s close of HK$27.1.

Following the purchase of 3 per cent stake, Geely is still shy off Kuwait Investment Authority, the largest single share owner of Daimler, which holds 6.8 per cent of the German company.

It is unclear whether Geely will continue to increase its holding on the open market.

Profits by Hong Kong-listed Geely Automobile jumped 128 per cent to 4.3 billion yuan (US$685.5 million) in the first half of 2017.

Geely’s January to June shipments jumped 89 per cent to 530,627 units, smashing the national growth of 1.6 per cent.