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

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’

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.”


Careem welcomes Saudization of ride-hailing sector, eyes further investment

Careem welcomes Saudization of ride-hailing sector, eyes further investment
Updated 20 min 52 sec ago

Careem welcomes Saudization of ride-hailing sector, eyes further investment

Careem welcomes Saudization of ride-hailing sector, eyes further investment
  • Careem said the company had been affected by the pandemic because workers stayed at home and cut down on their travel

DUBAI: Ride-hailing service Careem has welcomed a government decision to fully localize the sector in the Kingdom, saying the move will help to create more jobs for Saudi drivers.

The Saudi Ministry of Transport said the new rule would have limited impact as citizens already made up 96 percent of the workforce in the ride-hailing sector.

“We are proud that over 100,000 Saudi nationals are finding income-earning opportunities with Careem each month,” a Careem spokesperson told Arab News. “We’ve worked hand-in-hand with the Transport General Authority and Ministry of Human Resources and Social Development to help the Kingdom achieve its ambitious agenda, and applaud the efforts the government is making to support Saudis working in the ride-hailing sector.”

The spokesperson added that Careem planned to continue investing in the Kingdom with a greater range of transportation and delivery services. 

Although Careem did not give specific numbers for its operations in Saudi Arabia, it said it had 33 million registered users in 13 countries across the region and operated in 28 Saudi cities.

Ibrahim Manna, managing director of global markets at Careem, said the company had been affected by the pandemic because workers stayed at home and cut down on their travel.

“COVID-19 has impacted our ride-hailing, starting in March,” he told Arab News. “This is a natural result of lockdowns, curfews and other limitations of movement, changing user behavior and habits in daily life.”

But while the ride-hailing service decreased, food delivery demand soared.

“Delivery was one of the big growth levers,” he added. “Due to the change in the daily lives and needs of the customer, we adapted quickly and provided them with what they needed most. We partnered up with many stores, pharmacies and restaurants, in order to deliver essentials to citizens in Saudi Arabia during a difficult time.”

On Thursday Mueed Al Saeed, assisting vice president of Land Transport Regulation of the Public Transport Authority, said there were 16 companies including Careem licensed to operate ride-hailing services in the Kingdom.

He also said 300 million trips had been carried out during the past three years, and that there were 250,000 drivers actively working for these services.