China's Baic buys stake in Daimler for €2.5 billion

Alonside Geely, transaction would take Chinese ownership in the world’s biggest luxury-car maker to almost 15 per cent

Mercedes maker strengthens ties with automotive giants in China. AP

Daimler’s Chinese partner for over a decade, Beijing Automotive Group (Baic), is buying a €2.5 billion (Dh10.26bn) stake in the Mercedes-Benz maker, cementing ties between the two companies and extending China’s influence at one of Germany’s top industrial icons.

Beijing municipal government-backed Baic has acquired a 2.5 per cent holding and the right for an additional 2.5 per cent stake. Together with Daimler’s biggest shareholder - Zhejiang Geely’s billionaire owner Li Shufu - the transaction would take Chinese ownership in the world’s biggest luxury-car maker to almost 15 per cent.

“This step reinforces our successful partnership and is a signal of trust in the strategy and future potential of our company,” Daimler chief executive Ola Kallenius said.

Daimler shares rose as much as 4 per cent in Frankfurt trading, after declining 15 per cent in the past 12 months. The company has come under pressure from four profit warnings in just over a year after markets weakened and the car maker increased provisions for charges inclu bding for fallout from investigations into alleged tampering of diesel emissions in its vehicles.

China and the US are the two largest markets for Daimler’s main Mercedes-Benz cars unit. Baic’s transaction also leaves opens the question whether Daimler and Baic would reorganise their joint venture in China after restrictions for foreign investors in the world’s largest car market eased.

“It has been our intention to strengthen our alliance with Daimler through an investment,” said Heyi Xu, chairman of Baic. “This step reinforces our alignment with, and strong support for, Daimler’s management and strategy.”

Daimler is exploring additional cooperation projects with Geely, former CEO Dieter Zetsche said at the company’s annual general meeting in May and sought to allay concerns about potential conflicts with Baic. His successor Mr Kallenius told reporters that month he welcomes long-term shareholders who back Daimler’s strategy.

Geely declined to comment on the deal, saying the Chinese company is committed to a long-term investment in Daimler.

Mr Li has sought to harvest synergies from his investments, which include Sweden’s Volvo Cars to improve Geely’s product line-up and move to higher-end models. Geely formed a joint venture with Daimler to transform the German company’s diminutive Smart into an all-electric brand based in China.

Since 2003, Baic and Daimler have set up a number of cooperations in China, including the joint venture Beijing Benz Automotive Company that produces premium cars in the world’s biggest car market, as well as separate entities that make vans and trucks.