Daimler AG (DAI), the third-biggest maker of luxury cars, agreed to buy a stake in the car unit of Chinese partner Beijing Automotive Group Co. to spur efforts to catch up with competitors in the world’s largest auto market.
The parent of Mercedes-Benz will acquire 12 percent of the car division of the Chinese company, known as BAIC Motor, the Stuttgart, Germany-based manufacturer said today in a statement. The Beijing-based partner will grant Daimler two seats on the unit’s board of directors.
The investment is “significant, so that both companies can actively participate in the opportunities of the Chinese automotive market,” Daimler Chief Executive Officer Dieter Zetsche, who is also head of the Mercedes car business, said in the statement.
Zetsche has vowed to retake the top spot in worldwide luxury-vehicle sales by the end of the decade after Mercedes fell behind Bayerische Motoren Werke AG in 2005. Volkswagen AG (VOW)’s Audi unit, which has ranked second globally since 2011, also has a target of taking the luxury lead by 2020. China plays a key role in Zetsche’s strategy after Mercedes lagged behind BMW and Audi in sales growth in the country last year.
“It’s a long-term investment which secures Daimler an exclusive access to the partner,” said Christoph Stuermer, a Frankfurt-based analyst with research company IHS. The board seats will allow Daimler to have a say at the partner and start negotiating projects at an early stage, he said.
As European industrywide auto sales head into a sixth consecutive year of decline, German luxury-car makers are looking abroad for growth opportunities. The Chinese market has become increasingly important for earnings as buyers tend to opt for fully loaded upscale vehicles, resulting in higher returns for the manufacturers.
Mercedes deliveries in China rose 1.5 percent to 196,211 cars in 2012. Audi posted a 30 percent jump, selling 405,838 vehicles. Deliveries by the BMW brand in the market surged 40 percent to 303,169 cars.
Daimler’s investment in BAIC Motor is through the issuance of new shares. The transaction is expected to close by the end of this year or early next year, it said.
BAIC will increase its stake in its production joint venture with Daimler in China to 51 percent from 50 percent, the companies said. Owning the majority of Beijing Benz Automotive Co., which produces the Mercedes C- and E-Class sedans and GLK sport-utility vehicle, adds to the value of BAIC’s auto unit, which is planning an initial public offering.
Daimler rose as much as 0.9 percent and was unchanged at 42.88 euros as of 12:51 p.m. in Frankfurt. The stock has lost 2.2 percent over the past 12 months, valuing the carmaker at 45.8 billion euros ($62.5 billion).
BAIC, which also makes vehicles with Hyundai Motor Co. (005380) in China, is looking at an IPO in Hong Kong for the unit, possibly this year, with a target of raising about 10 billion yuan ($1.6 billion), Chairman Xu Heyi said in September.
Daimler’s push to expand in China includes the establishment in December of a management-board position dedicated to the country. The company assigned Hubertus Troska, formerly head of the Mercedes-Benz trucks business, to the post.
The German manufacturer and BAIC have also set up a jointly owned sales organization, which combines previously separate marketing of imported and locally produced cars. Daimler will raise its stake in the sales partnership to 51 percent from 50 percent.
Daimler’s passenger car unit plans to add 50 dealers in China this year, expanding the sales network to 270 showrooms.
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