Daimler has raised the prospect of boosting its stake in a joint venture with Chinese partner BAIC Motor, according to Bloomberg sources, as the automaker seeks to gain more control over its operations in the world's largest car market.
Daimler expressed an interest in increasing its holding to at least 65% from 49%, one source said. The discussions with state owned BAIC are exploratory and the two carmakers may fail to to reach an agreement, the sources said.
Bloomberg noted the US-China trade war has made it more appealing for global carmakers to expand their foothold in China which eased the rules around automotive ventures this year, after decades of restricting foreign car companies to owning a minority stake with a local partner. The move also threatens to dry up a key source of profit for domestic automakers like BAIC.
Bloomberg also noted, in October, BMW became the first company to take advantage of this rule change and announced it would own a majority stake in its venture with Brilliance China Automotive. It would invest EUR3.6bn (US$4.1bn) to raise its stake in the venture to 75% from 50% when the rules take effect in 2022.
"BMW's plan to lift its stake in the venture with Brilliance sets a precedence for other foreign automakers increase the ownership of their manufacturing ventures in China," said Steve Man, a Bloomberg Intelligence analyst in Hong Kong.
Daimler declined to comment to Bloomberg on talks with BAIC but said it was satisfied with the setup in China and its partnerships. Asked whether there are any early discussions about Daimler boosting its stake in BAIC, a representative for the Chinese company said, "there is no such thing", without elaborating. BAIC, he said, was happy with its current collaboration with Daimler.
A 16% stake in the BAIC venture would be valued at between EUR2.3bn and EUR3bn, Christian Ludwig, an analyst with Bankhaus Lampe, estimated for Bloomberg.
Last year, Daimler produced 430,000 vehicles through its venture with BAIC, accounting for 70% of its sales in the country. The manufacturer also makes electric cars under the Denza brand through a venture with BYD but sales have been limited. In the first 10 months of the year, sales in China reached more than 550,000 units, a gain of 13%.
From 2022, global car companies will be allowed to hold majority stakes in passenger vehicle joint ventures and the requirement to have a partner has already been lifted for electric car businesses.