China has increased its ownership of German car group Daimler by investing a further $2.8bn (€2.5bn) in the Mercedes-Benz maker.
Daimler’s Chinese partner, the State-backed Beijing Automotive Group, is buying a 5% stake, cementing a more than decade-long alliance of the car manufacturers. Together with Daimler’s top shareholder — Zhejiang Geely Holding Group’s billionaire owner Li Shufu — the transaction would take Chinese ownership in the world’s biggest luxury-car maker to almost 15%.
“This step reinforces our successful partnership and is a signal of trust in the strategy and future potential of our company,” said Daimler chief Ola Kallenius.
Daimler’s shares rose by over 5% on the news. The company, which reports earnings today, has issued four profit warnings in just over a year after markets weakened and the carmaker increased provisions for charges including for the financial fallout from investigations into alleged tampering of diesel emissions.
The string of bad news has put greater urgency on the new CEO to show he can lift poor returns. Beijing Automotive Group’s investment is yet another example of how carmakers fight for survival by forging deeper partnerships as new technologies and regulations upend the industry.
Margins at the core Mercedes-Benz cars division are expected to fall to 3% this year, trailing typically lower-returning mass-market carmakers like PSA Group, which owns Peugeot, Citroen, and Opel.
Another Chinese shareholder at one of Germany’s car companies could stir concerns in Europe about China’s influence, while carmakers already battle a trade war that has left global shipments of cars at the mercy of tit-for-tat tariff measures. China and the US are the two largest markets for Mercedes-Benz.
Beijing Automotive Group’s transaction also raises the question of whether it and Daimler may reorganise their joint venture in China after restrictions for foreign investors in the world’s largest motor market eased.