China Drives To Germany

0226_Daimler

Image source: Shutterstock.com

What's going on?

Chinese carmaker Geely said on Saturday that it had amassed an almost 10% stake in Daimler (tweet this), the German automaker which owns Mercedes-Benz. It’s the latest sign that the future of the auto industry may, eventually, be made in China…

What does this mean?

Geely, which owns Volvo Cars among other automobile interests, is China’s largest privately owned automaker and now Daimler’s single biggest shareholder. Geely wants to forge an alliance with Daimler, hoping to access its technology, particularly for autonomous driving. In return, Geely has pledged to be a supportive long-term investor – something which Daimler says it’s “pleased” about.

Why should I care?

For markets: It’s not clear how thrilled Daimler is by Geely’s plans.

Back in November, Daimler refused to create new shares specifically for Geely to buy (Daimler said it didn’t want its other shareholders to own proportionally less). That’s a sign that Daimler didn’t exactly roll out the welcome mat. Now Geely has purchased shares on the open market and Daimler must play nice, to an extent, given Geely’s substantial ownership. Cooperating with Geely could be a big boon to Daimler’s ambitions in China, but in return for helping Daimler sell into the Chinese market, Geely could demand Daimler share its proprietary technology with it – something that Daimler may not want to do.


The bigger picture: Western countries are pushing back against Chinese investment.

In and of itself, it’s not a huge deal if a Chinese firm wants to buy 10% of a company. Just like in the US, however, German and other European political leaders are growing concerned that Chinese companies are amassing overseas investments in order to gain access to strategically important technology. The US government recently blocked a swath of Chinese acquisitions of US companies on national security grounds – and European countries are now taking steps to give the EU more power to do the same.  

Originally posted as part of the Finimize daily email.

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