Automakers in final stage of cross-holding agreement negotiations
Hong Kong-listed BAIC Motor is expecting to make history in China's auto sector, as it is in the process of becoming the country's first automaker to form a crossholding alliance with an international auto group.
China's fifth-largest passenger automaker by volume is the final negotiations to become a shareholder of the German auto giant Daimler AG by the end of 2015, said its chairman Xu Heyi.
Daimler is currently BAIC Motors' third-largest shareholder, holding a 10 percent stake.
The shares BAIC plans to buy "will not be a small amount", said Xu on Aug 24, at an event to mark the 10th anniversary of Beijing Benz Automotive Co, a joint venture between BAIC Motor, Daimler AG and Daimler Greater China.
The share purchase plan is part of a series of agreements Daimler and BAIC signed in 2013 to strengthen their cooperation.
Also among the agreements is a plan for BAIC to increase its shares in Beijing Benz Automotive Co from 50 percent to 51 percent, and Daimler to increase its stake in Beijing Mercedes-Benz Sales Services Co from 50 percent to 51 percent.
The usual pattern for Chinese and foreign joint ventures is 50:50.
Daimler said in an announcement that it has a very close alliance with BAIC.
"We want to continue to be attractive for potential long-term investors. Therefore, we are also welcoming investors from China," Daimler said in its announcement.
Zhang Yu, managing director of Automotive Foresight (Shanghai), said, "It is a good thing for both of them, and it will make the two companies' future cooperation go smoother."
According to Zhang, becoming a shareholder of Daimler is a "strategic investment" for BAIC, and the company will benefit from it by getting cheaper technology transfers and faster introduction of new products from Daimler.
"Globally, Daimler is growing and it is definitely a good thing to be its shareholder," Zhang said. He said he expects BAIC's shares will rise after the crossholding cooperation.
For Daimler, the move shows its commitment to the Chinese market and its desire to cooperate with BAIC, Zhang said.
"It will gain a smoother relationship with BAIC and a better relationship with the government," Zhang said.
The move shows Daimler sees China as a promising market, and the company is sending a signal that it wants to focus on a single cooperative partner in the country, Zhang added.
"Daimler will launch one or two new products every year in the future, and many of Daimler's locally produced models will be new-energy vehicles from next year," National Business Daily's website on Thursday quoted Xu as saying.
The website said the Daimler vehicles produced by BBAC will be exported overseas in the future.
Xu said BAIC and Daimler would also intend to establish joint venture companies in aspects such as pre-owned cars and auto finance in the future.
Besides BAIC, several other Chinese automakers are exploring the possibility of joining hands with overseas brands through acquiring their shares.
In 2014, Dongfeng Motor spent 800 million euros ($901.3 million) and bought 14 percent of PSA Peugeot Citroen's shares to become one of biggest shareholders of the company.
In 2010, SAIC Motor spent $500 million on 0.97 percent of General Motors' total shares.
