By on May 11, 2019

A year after Chinese automaker Geely announced the purchase of a nearly 10-percent stake in auto giant Daimler AG, a second carmaker from the People’s Republic is reportedly interested in acquiring a piece of the German company’s action. A stealthy accumulation of shares could already be underway.

According to multiple sources who spoke with Reuters, BAIC Group, Daimler’s Chinese joint venture partner, wants a stake of up to 5 percent to cement the two companies’ partnership. Following Geely’s big share buy, the Chinese company surprised many by offering to save the failing Smart brand by turning it into a joint venture. Daimler was only too happy to accept the offer. A new generation of Smart vehicles are set to roll out of China in 2021.

Daimler is likely already aware of BAIC’s intentions, with two of the three sources saying the company informed Daimler of its plan earlier this year. BAIC has also reportedly sought Chinese government approval for the share purchase.

One of the sources claims BAIC has already begun purchasing Daimler shares on the open market, slowly accumulating the desired stake of an automaker that has announced it will not issue new stock. It’s hardly an inexpensive task — to reach a 5-percent stake, BAIC would need to scrounge up roughly 3.4 billion dollars.

Still, however many shares BAIC may have already bought, there’s still a way to go before it reaches is rumored goal. German law required buyers to notify regulators when their take of a German company reaches 3 percent, something that has not yet occurred.

While Daimler has told BAIC in the past that it wouldn’t drop its partner without the two reaching an agreement first, the Geely share buy and Smart partnership seems to have left the company rattled, leading to a similar stake-by-stealth plan as enacted by its domestic rival.

In March, Reuters reported that Daimler had asked Goldman Sachs for help in increasing its stake in BAIC, following China’s decision to gradually relax foreign ownership rules. Daimler holds a 9.55-percent stake its Chinese production partner and a 49-percent stake in Beijing Benz Automotive Company, the two’s joint venture.

[Image: Daimler AG]

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9 Comments on “Report: Second Chinese Automaker Amassing Big Daimler Stake...”

  • avatar

    Pretty interesting article. A little peek at how at least these two governments manage foreign investments.

    In my experience 49% makes you a limited partner. Probably little say in most decisions made in the name of the partnership. Not sure China would allow more than 49% non Chinese ownership in any joint venture.

  • avatar

    The chronically and notoriously quality-averse Chinese, who exclusively specialize in manufacturing low-quality products in high volumes, will have no problems producing Mercedes-Benz vehicles once they take over Daimler, because Daimler only manufactures low-quality products already (with only the margins being of “high quality”). Being taken over by the Chinese is the closest Daimler ever will come to a true merger of equals.

    • 0 avatar

      If this was your application for becoming a comedian… you failed.

    • 0 avatar

      The Chinese-made parts in the computer or smartphone you used to post this message seem to be working just fine…

      Having worked on a project which required Chinese manufacturing, my experience has been that there are some high quality manufacturers in China — and some that are not. It’s a big country over there.

      • 0 avatar

        I sometimes use Chinese electronic parts that are the absolute best quality you can find anywhere. Even the company logo etched into the circuit board is finely detailed. Are they cheap? No. But, you’re getting top quality. I’ve also found Chinese suppliers more willing to work with small companies.

    • 0 avatar

      Well, MB is making vehicles in Alabama, so not a stretch of the imagination.

  • avatar
    Steve Biro

    I know a number of people who have done business in China. The general consensus seems to be that the Chinese are capable of very high quality – but one must keep an eye on them for corner-cutting if you’re talking about manufacturing through a third party. Examples 1 through 1000 might be fantastic. Example 100,000? Maybe not so much.

    • 0 avatar

      A friend’s experience echoes some of the responses above. He launched a business which relies on proprietary IT hardware of his own design. He did research Chinese manufacture, going so far as to travel there to meet with potential suppliers. As it turned out, in order to ensure good quality, cost would have been on par with what it was for US manufacture. Furthermore, he had more confidence in maintaining quality and resolving issues if he were working with a US manufacturer.

      I’ll note that his business provides a service. He’s not selling the hardware on, he’s using it. It *has* to work.

      Conversely, I’ve met more than a handful of North American and European executives–invariably men in their late-50s to late-60s and looking for another short-term score or two prior to retirement–who are happy to pass outsourced garbage on to their customers and their customers’ clients. What do they care about the medium and long-term effects on clients, clients’ customers, and indeed even on their own businesses and colleagues? There are some truly evil people out there; the president of my current employer is one. Caveat emptor.

  • avatar

    Chinese manufacturers are capable of quality but they’d rather cut corners in order to increase profit. I’d never do business with a Chinese firm. They’re all sketchy as f**k. If you put your faith in a Chinese manufacturer, you deserve all the pain and headaches that will surely come to you.

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