BAIC plunges on report Daimler may raise stake
Move would come amid relaxation of auto ownership
Hong Kong-listed BAIC Motor Corp’s shares slumped on Wednesday after Bloomberg reported late Tuesday that Germany’s Daimler AG is considering increasing its stake in its joint venture (JV) with the Chinese company. BAIC denied the report. “We are satisfied with the current cooperative relations and please understand we cannot comment on speculative information,” BAIC said in a reply to domestic news site cs.com.cn on Wednesday.
Daimler told Reuters that it does not comment on speculation, adding that it was satisfied with its successful set-up in China and its partnerships.
According to the Bloomberg report, which cited people familiar with the stake discussions, Daimler expressed an interest in increasing its holding to at least 65 percent from 49 percent.
A 16 percent stake in the venture is likely to be valued at between 2.3 billion euros ($2.6 billion) and 3 billion euros, the report said, citing Christian Ludwig, an analyst with Bankhaus Lampe.
The discussions with Stateowned BAIC are exploratory and the two carmakers may fail to reach an agreement, the people said.
Earlier this year, Li Shufu, chairman of Zhejiang Geely Holding Group, took a 9.69 percent stake in Daimler with Geely becoming the single largest investor in the parent of Mercedes-Benz by building up a position of just under 10 percent through purchases in the stock market.
Daimler Mobility Services and Geely Group Co – Geely Holding Group’s new business entity – announced in October that they will form a premium ride-hailing JV in China, according to a statement on the website of Geely.
The 50-50 venture will be based in Hangzhou, capital of East China’s Zhejiang Province, the statement said.
The venture will provide ride-hailing mobility services in several Chinese cities using premium vehicles including but not limited to MercedesBenz vehicles.
The fleet initially will include Mercedes-Benz S-Class, E-Class and V-Class.
In 2017, Daimler produced 427,000 vehicles through its venture with BAIC, up 34.9 percent year-on-year, with locally produced vehicles accounting for some 70 percent of its sales in China.
In the first half of this year, the JV between Daimler and BAIC produced 1.2 million completed vehicles, up 7.6 percent from the previous year.
The reported increase in stake would follow a similar move by BMW, which agreed in October to pay 3.6 billion euros to take control of its main JV in China with Brilliance China Automotive Holdings.
Brilliance China’s shares slumped nearly 30 percent on that news, with analysts saying the deal would substantially decrease Brilliance’s long-term value even as the Chinese government starts to relax foreign ownership rules for the world’s biggest auto market.
Owning majority stakes will likely spur foreign companies to shift more production to China, helping them protect their profits amid uncertainty over a trade war between China and the US.
In April, the National Development and Reform Commission, the top economic planner, said from 2022, global car companies will be allowed to hold majority stakes in passenger vehicle JVs.
The requirement to have a partner has already been lifted for electric vehicles.