The German government itself very rarely comments on the happenings in their automotive industry. As I’m sure you could imagine, they don’t have a whole lot to worry about. The collective industry builds some of the most reliable, beloved cars in the world. German names such as BMW, Mercedes-Benz and Volkswagen remain firm favourites. In South Africa, that is no different.
This latest development, though, is being closely monitored by the German government.
Before the rest of the motoring world blows a piston about things, let’s have a look at the details of the transaction.
Geely Getting In On The Goods At Mercedes-Benz
In a deal worth approximately $9 billion, Chinese company Geely has bought up just shy of 10% shares in the German giant. This has placed Geely as the largest single-shareholder in the company.
The Chinese group, owned by billionaire Li Shufu, clearly has global ambitions. It may be looking to go the same route as VW and build brands in a number of market segments. Geely is already the sole owner of Sweden’s Volvo, as well as the London Taxi Company, which built the new London cabs. It also owns Lotus, Polestar – which is a performance electric car brand recently split from Volvo, another EV marque – Lynk & Co and a flying car company called Terrafugia.
Geely’s plans to up its stake in Daimler have been reported for some time. Daimler itself has confirmed the move earlier this week, stating that it welcomes another major investor.
The 9.69% stake acquisition is believed to signify Geely’s desire for technological cooperation. See, Mercedes-Benz is widely known to be a leader in Electric Vehicle technology, including work on the battery and car design. Mercedes spends around R150 million per day on R&D, and has already announced its intentions of launching ten different electric vehicles by 2022 under its new EQ brand.
Sure, Geely has this kind of money to throw around as well, but can they match the work of world-famous German engineering? Few companies can. It seems a lot simpler to just buy into the company, build a partnership and work on integrating this tech into Geely’s future projects.
The emissions issue in China is dire, and this relationship may also be a faster solution.
The German Government
The fact that Geely might desire access to Mercedes-Benz innovation and technology in exchange for this investment has raised some concerns about the Chinese firm.
The German government, so rarely vocal about these things, has said it would not block the investment. The government, though, is chiefly concerned about the deal being used as a gateway for Chinese industrial policy interests.
German Economy Minister, Brigitte Zypries, has said it must ‘keep an especially watchful eye’ on the situation. Speaking to the Handelsblatt newspaper, she said that Germany is ‘an open economy that welcomes investments, as long as they happen in line with the market.’
These concerns may seem unreasonable to some.
There are real trepidations surrounding the subject, though, and not just in Germany. European economies have voiced their unease about the fact that wealthy Chinese firms could gain too much influence through foreign investments. It is also noteworthy that the European Union is much more open to foreign investment than China is.
In a statement by Geely, owner Li stated that he was looking for long-term commitment and wished to ‘accompany Daimler on its way to becoming the world’s leading electro-mobility provider’.
He went on to say that with the increase of ‘invaders from outside’ the traditional sector – meaning the likes of Tesla or Waymo – firms needed to cooperate and form alliances.
Mercedes-Benz may be leading the traditional sector’s charge on the electric vehicle front, but it’s China which needs it most.
China is widely considered to be the most crucial future market for global car manufacturers.
And, Germany Invests In China
The Chinese government has declared that 20% of all cars sold by 2025 need to be electric or hybrid vehicles. This target is encouraging all kinds of global car manufacturers to increase investments in China.
Not only has BMW announced a deal with Chinese manufacturer, Great Wall Motor, but Daimler has also made investments of its own.
Over the weekend, Daimler announced a $1.9 billion investment into a partnership with Chinese auto firm BAIC. This investment will go toward modernising a BAIC plant in order to build Mercedes-Benz vehicles.
Daimler’s new investment, along with an existing industrial partnership with Renault-Nissan, may just throw a spanner into Geely’s plans, whatever those may be. Technological superiority. Invasion of the successful automotive industry. European domination. Stuff like that.
At the very least, it may prove to be tricky for Mercedes-Benz in the coming year.
A Closing Thought, And A Prayer For Mercedes
There are some things worth noting before we close off this article. Back in November, Geely had requested for Daimler to issue new shares, so that it could buy a stake. Then, as it is now, Geely wanted access to Mercedes-Benz technology.
Daimler, then, allegedly turned the offer down, stating that it did not want to dilute existing shareholders. Geely’s Li then began to quietly amass the 9.69% worth of shares at Daimler’s current share price. This has now resulted in Li becoming the largest single shareholder.
The news has alarmed the German government, as stated above. The German state secretary, Matthias Machnig, said that there would be an EU trade ministers meeting next week in Sofia. Here, they would discuss how to do a better job of protecting strategically important European companies from unwanted investors.
Companies just like Daimler.
“It is important that Europe keeps a close eye on which key European technologies foreign strategic investors are setting their sights on,” he said.
It is also worth noting that under Geely ownership, Volvo has been doing a lot better. The Chinese firm has been happy to throw money at the Swedes and allow them to do their own thing. It seems to be paying off.
Volvo has also committed to manufacturing electric vehicles, and even though the company is now doing a lot better, it’s no Mercedes-Benz.
Perhaps Daimler is just being smart about things and looking to the future. China is where the money will be. Either way, your future Merc may very well be Made In China.