Daimler ‘to seek majority control of its main China joint venture’

Mercedes-Benz parent company Daimler has called on China to ease ownership restrictions to ensure a ‘level playing field’ for foreign firms. (Shutterstock)
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Updated 18 December 2019

Daimler ‘to seek majority control of its main China joint venture’

  • Sources point to expansion plan as tension mounts between Berlin and Beijing over possible ban on Huawei

HONG KONG: Daimler is seeking to buy a majority stake in its Chinese operations, three people familiar with the matter told Reuters, after initial efforts to raise its stake failed and as Chinese investors tighten their grip on the German carmaker.

Daimler’s moves come at a time of heightened tension between Berlin and Beijing as German lawmakers debate whether to bar China’s Huawei from local 5G networks and as German companies look to ease Chinese ownership restrictions.

Daimler has been exploring several options to strengthen its control of Beijing Benz Automotive Co, its Chinese joint venture with BAIC Group, including a plan to raise its stake to 75 percent from the current 49 percent, two of the people familiar with the matter said.

Daimler faces some opposition within BAIC as the Chinese partner wants to maintain control of the highly profitable business that has benefited from strong sales of Mercedes-Benz cars and helped it fund expansion into other activities, sources, who declined to be named, told Reuters.

Daimler, which owns the Mercedes-Benz brand, declined to comment on its China expansion plans. BAIC did not respond to requests for comment.

Daimler’s cash cow joint venture with BAIC is the main profit contributor of BAIC Group’s Hong Kong listed company BAIC Motor Corp, which also has assets of BAIC’s own brand cars and its joint venture with South Korea’s carmaker Hyundai Motor.

In 2018, BAIC Motor reported 37.01 billion yuan ($5.26 billion) gross profit while that of Beijing Benz Automotive contributed 40.52 billion yuan, excluding the profit from the China JV, BAIC Motor was loss-making last year.

Beijing Benz Automotive, which started building and selling locally made vehicles in 2006, sold around 485,000 units last year, accounting for more than 70 percent of Mercedes-Benz’s China sales.

In China, the world’s biggest auto market, 525,890 Mercedes-Benz cars were sold in the first nine months this year, up 5 percent from a year earlier even as the total market keeps declining. Its German rival Audi sold 491,040 units and Munich-based BMW sold 526,017 BMW and Mini-branded cars over the same period in China.

Daimler’s stake purchase ambitions come as BAIC is pursuing a separate deal to buy a 10 percent stake in the German carmaker, sources said, to upstage Zhejiang Geely Holding Group, which owns a 9.69 percent Daimler stake.

If BAIC clinches a 10 percent shareholding, Chinese companies will control just under 20 percent of the luxury carmaker, enough to block significant decisions at Daimler’s shareholder meeting, such as nominating directors or approving major investments.

These key decisions need at least 75 percent of votes cast at an annual general meeting, giving any shareholder with a 20 percent stake a blocking minority.

At Daimler’s 2019 annual general meeting, only 52.91 percent of the company’s share capital was represented.

Daimler held talks with BAIC in 2018 about increasing its ownership of the China joint venture, but the talks petered out, prompting Daimler’s management to ask Goldman Sachs to explore ways to increase its 9.55 percent stake in BAIC Motor.

In 2018 Beijing started easing foreign ownership rules, allowing German carmaker BMW to buy a 75 per cent stake in its joint venture with Brilliance China Automotive Holdings Ltd. by 2022, when foreign firms will be permitted to control a non-electric passenger car company in China, prompting Daimler to pursue similar ambitions.

Daimler has urged the German government to press Beijing to ease ownership restrictions to ensure a “level playing field,” just as China’s ambassador to Germany warned Berlin not to block China’s Huawei from supplying German telecoms equipment.

The US, which is embroiled in a global trade dispute with China, has urged German chancellor Angela Merkel to exclude Huawei from mobile equipment auctions on security grounds.

Huawei says it is an independent company and dismisses such concerns as baseless attempts by the US to damage its business and reputation.

Last week China’s ambassador to Germany, Ken Wu said Beijing could retaliate if Huawei was excluded from Germany’s 5G rollout.

“If Germany were to take a decision in the end that would exclude Huawei from the German market, then it should expect consequences,” the Chinese ambassador said. “The Chinese government will not just stand by and watch.”


Bitcoin heads for worst weekly loss in months

Updated 22 January 2021

Bitcoin heads for worst weekly loss in months

  • The world’s most popular cryptocurrency fell more than 5 percent to an almost three-week low of $28,800 early in the Asia session

SINGAPORE: Bitcoin wavered on Friday and was heading toward its sharpest weekly drop since September, as worries over regulation and its frothy rally drove a pullback from recent record highs.
The world’s most popular cryptocurrency fell more than 5 percent to an almost three-week low of $28,800 early in the Asia session, before steadying near $32,000. It has lost 11 percent so far this week, the biggest drop since a 12 percent fall in September.
Traders said a report posted to Twitter by BitMEX Research suggesting that part of a bitcoin may have been spent twice was enough to trigger selling, even if concerns were later resolved.
“You wouldn’t want to rationalize too much into a market that’s as inefficient and immature as bitcoin, but certainly there’s a reversal in momentum,” said Kyle Rodda, an analyst at IG Markets in Melbourne, in the wake of the BitMEX report.
“The herd has probably looked at this and thought it sounded scary and shocking and it’s now the time to sell.”
Bitcoin was trading more than 20 percent below the record high of $42,000 hit two weeks ago, losing ground amid growing concerns that it is one of a number of price bubbles and as cryptocurrencies catch regulators’ attention.
During a US Senate hearing on Tuesday, Janet Yellen, President Joe Biden’s pick to head the US Treasury, expressed concerns that cryptocurrencies could be used to finance illegal activities.
That followed a call last week from European Central Bank President Christine Lagarde for global regulation of bitcoin.
Still, some said the pullback comes with the territory for an asset that is some 700 percent above the 2020 low of $3,850 hit in March.
“It’s a highly volatile piece,” said Michael McCarthy, strategist at brokerage CMC Markets in Sydney. “It made extraordinary gains and it’s doing what bitcoin does and swinging around.”
Second-biggest cryptocurrency ethereum initially slipped to a one-week low on Friday before rising 6 percent late in the Asia session to $1,177.