Chinese tangle for Daimler? Geely buys 9.7% of Daimler, and Daimler invests €2,000 million in BAIC

The purchase of almost 10 per cent of the share capital of the Daimler group (9.69% – 103,619,340 shares) by the Chinese billionaire Li Shufu has taken the leaders of the German group completely by surprise, to the point that just as it was taking place, the top executives of the European company were confirming and closing agreements with BAIC, one of the Chinese carmaker’s rival companies, to produce its Premium vehicles and its future electric vehicles in the Asian country.

The founder of the Geely Group, Li Shufu, announced this weekend that he owns 9.7 per cent of Daimler’s shares, and today, Monday, he will hold separate meetings in Germany with the leaders of the Stuttgart brand and the German Government, in Berlin. With that percentage, Shufu becomes Daimler’s main shareholder, a title that until now belonged to the Qatari sovereign fund, which held 6.8 per cent of the total shares of the German manufacturer, a position it has maintained for more than a decade.

Shufu has invested €7.3 billion ($9 billion) in recent times in the gradual acquisition of various share packages in the company, thereby making the largest investment by a Chinese manufacturer in a global car manufacturer. According to Li Donghui, chief financial officer of the Geely Group, the purchase of the share package was financed through “a combined offer of debt, equity and various financial instruments of its own and of the Geely Group outside China, and without using at any time capital from Chinese domestic funds“, which may have posed some kind of impediment on the part of the German Government.

For Donghui, “the real cost of Geely’s stake in Daimler is lower than its market value.” Without giving further details, Donghui stated that with the purchase Geely takes on “a long-term commitment” with its purchase in Daimler, while also stating that “for the moment, neither Geely Group nor any other company in the Chinese automotive group intends to acquire additional shares at this time”.

The purchase has been confirmed by Daimler in a brief statement welcoming Li Shufu to the company. In a statement in which, although Daimler welcomes Li Shufu’s arrival as a new shareholder “for the long term” of the German group, it does not hide a certain skepticism when it indicates that “Daimler is pleased to announce that with Li Shufu could gain another long-term-oriented shareholder, who is convinced of the strength of Daimler’s innovation, its strategy and its future potential”.

According to Daimler sources, “Li Shufu is a Chinese businessman that Daimler knows well, whom it holds in high regard as a competitor and whose strategy focuses on future developments”.

Experience suggests that this is the personality of the Chinese billionaire owner, who, given the excellent current moment of Volvo, which he bought from the Ford Group in 2010, and the recent acquisition agreement for Volvo AB, the world’s second-largest truck manufacturer, which he closed at the end of 2017, or Malaysia’s Proton in autumn 2017, and Lotus a few months earlier, it is quite clear that he does not usually make speculative moves but seeks to strengthen his automotive group.

“Competitors who technologically challenge the global automotive industry in the 21st century are not part of today’s automotive industry,” said Li Shufu in his statement, adding: “But with challenges come opportunities. No current player in the automotive industry will be able to win this battle against outsiders to the sector on its own.”

In any case, it is nevertheless telling that the purchase of the share package by Li Shufu takes place at the same time as Daimler itself and its Chinese partner BAIC announced this very weekend that they plan to jointly invest almost €2 billion in setting up a new cutting-edge factory in China, which shows that Geely’s entry into Daimler’s capital has been quite a surprise. Especially when, speaking about its activity in China, the spokesperson for the star brand group stated that “Daimler already has a solid base in China. We have a very strong partner in our current cooperation with BAIC Motor.”

It remains to be seen what Li Shufu’s intentions are. Although the purchase of the share package does not allow him to enter the day-to-day management of the German car company, it will open doors for him to influence its strategy through the board of directors, where he will have the right to be present and to influence the company’s future policies. In any case, as several analysts say, “A stake in Daimler by Geely would underline its drive for collaboration that will help them gain more experience in other areas, such as, for example, electric cars, while also opening another new route into China for Daimler.”