Daimler is reportedly exploring pros and cons and means of increasing its stake in Chinese carmaker BAIC Motor Corp which is its domestic business partner in its joint venture for car manufacturing in China and has asked Goldman Sachs to help it with this, according to reports.
If this deal goes through, it would be the second in the Chinese auto industry since the foreign ownership rules were relaxed last year by the authorities of the largest auto market in the world.
The first to make use of the relaxed regulation on foreign car companies in China was Daimler’s rival BMW when it agreed to increase its stake in its venture with Brilliance China Automotive Holdings Ltd to take up a controlling stake in a deal worth $4.08 billion.
According to previous rules and regulations on foreign car and auto companies in China, there was cap on the companies to own controlling shares of a joint venture with a Chinese partner. The Chinese authorities last year relaxed that norm of stakes for those foreign companies that were engaged in manufacturing of fully electric and plug-in hybrid vehicles. The stake cap rule applicable for makers of commercial vehicles such as trucks and buses is set to be completely eliminated in 2020.
For the wider auto market, the limits on ownership would be removed in 2022. BMW’s deal with Brilliance China will only take effect then.
According to reports, negotiations between Daimler and BAIC are at an early stage and there could be changes in the plans of Daimler to increase its share in the joint venture with BAIC’s Hong Kong-listed entity.
According to BAIC’s June 2018 interim report, 30.4 per cent of BAIC’s Hong Kong-listed shares are owned by Daimler which is equivalent to 9.55 per cent overall stake in its Chinese partner.
State-owned BAIC Group and steel giant Beijing Shougang owns 42.6 percent and 12.8 percent of BAIC respectively through its non-tradable domestic shares.
Reports however did not make it clear whether a majority stake in BAIC would be sought to be owned by Daimler. The market capitalization of BAIC is $4.9 billion.
There were no comments available about the development form Daimler while there were also no response from Beijing-based BAIC to media queries for a comment on the issue.
Daimler has a 49 per cent ownership in its main JV with BAIC called the Beijing Benz Automotive Co and a 3.93 per cent share of Beijing Electric Vehicle Co. which is a sister concern of BAIC. Daimler also has another joint venture in China with new energy vehicle maker BYD although of a smaller value.
According to a Reuters report in October, a ride-hailing JV in China with Geely Group is also being set up by Daimler. In early 2018, Geely bought a 9.69 per cent stake in Daimler in and demanded an alliance.
According to reports, Daimler would still like to raise its 49 percent stake in Beijing Benz Automotive. According to sources, the talks last year between Daimler and BAIC did not end in any positive outcome till the beginning of the current year.
(Adapted from Reuters.com)