Geely Made $9 Billion Stake in Daimler

Li Shufu, the chairperson of Zhejiang Geely Holding, has made a $9 billion or £6.4 billion stake in Daimler, a German multinational automotive corporation, hoping that he can go through an alliance to access the technology of the German company.

Geely is now the biggest shareholder of German automaker, Diamler. 

The purchase by Li means that Geely, the largest privately owned automaker in China, is now the biggest shareholder of Diamler.

Last Saturday, Geely stated that the company has no plans “for the time being” to increase the stake further. Instead, the automaker will pursue to forge an alliance with Daimler, which is developing electric and self-driving vehicles.

“No current car industry player is likely to win this battle against the invaders from outside without friends. To achieve and assert technological leadership, one has to adapt a new way of thinking in terms of sharing and combining strength. My investment in Daimler reflects this vision,” stated Li.

Geely has been on an expansion drive. The company now owns LEVC, the maker of black cabs in London, Volvo Cars, and just last year it took a majority stake in Lotus, a sports car maker. The automaker also has a 49.9 percent stake in Proton, a Malaysian automaker, a $3.3 billion stake in Volvo Trucks, and control of flying car start-up, Terrafugia.

The move of Geely on Daimler poses a challenge to the German automaker, since Mercedes-Benz already has an industrial alliance with Renault-Nissan to make cars and trucks.

Renault-Nissan owns a 3.1 percent stake in Daimler. Meanwhile, the German automaker has announced its plans to build electric cars with BAIC Motor Corporation, its existing Chinese joint-venture partner.

“It's not clear what Geely wants and how it's going to work, but we view this move as part of a broader Chinese move to gain involvement in the European automotive industry,” Max Warburton, an analyst, stated.

“China wants a payback after spending a decade gifting the European auto industry super-normal growth and profits. Now it wants more direct access to technology, brands, and profits.”

 

Shares of Geely Increases

Geely’s shares went up after its chairperson announced its $9 billion stake in Daimler.

On Monday, Li is expected to meet with the executives of the German automaker in Stuttgart and hopes to meet the top German officials in Berlin.

“It’s one thing to be an investor, a significant investor, but it’s another to be an alliance partner,” James Chao, a chief of consultancy in HIS Markit Automotive, stated.

“I think this is the start of a process of negotiations to get something hammered out... Whether or not it will work, we’ll see.”

Meanwhile, the stock of Geely increased 7 percent on Monday, giving it a market value of $29 billion. Daimler’s shares, on the other hand, went down 0.6 percent in the early trade.

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