Dr Dieter Zetsche

CHINESE automotive giant Zhejiang Geely Holding Group Company Ltd (Geely) has made the shock move of taking shares in Mercedes-Benz parent Daimler AG as it seeks an alliance with the German over electric vehicle technology.

Geely, owner of Volvo Cars and others including Lotus, is reported to have bought about 2.5 per cent of Daimler in an on-market transaction and has made noises about wanting a greater slice, according to reports out of Germany and China by Reuters.

The Chinese company, which started in 1986 making refrigerators and is now valued at about $A270 billion, in November made an offer to Daimler to buy five per cent of the company at a discounted rate via a share placement.

This purchase would have cost Geely about $A6 billion. Daimler rejected the advance, saying it would dilute the shareholding of existing investors.

Now Geely is planning to increase its share by on-market purchases. Reuters said Geely is believed to want to become the biggest shareholder, trouncing the existing majority stake of 6.8 per cent held by the Kuwait Investment Authority.

Institutional investors own 70.7 per cent of Daimler and other majors include the Renault-Nissan-Mitsubishi Alliance with 3.1 per cent.

The German company also has business links with other Chinese companies, including owning 12 per cent of Beijing Automotive Group (known as BAIC) and 50 per cent of Denza, the alliance company involved in electric vehicles and formed by Daimler and BYD Auto.

Lotus Elise

Reuters reported that Daimler this week said that it would welcome interest from long-term shareholders and said any significant changes to its shareholder structure would be published on its website. There was no shareholder update as of Thursday this week.

Reuters tracked down Daimler CEO Dr Dieter Zetsche this week at the launch of the new Mercedes-Benz Sprinter van in Germany.

He said he had no information about Geely’s purchases of Daimler shares and that “I haven’t seen the chairman of Geely at least for a year”.

Reuters added that high on Geely’s thoughts would be to establish an electric car joint venture in Wuhan, the capital of China’s Hubei province, with Daimler.

Volvo XC40

Geely is acting quickly to access electric vehicle technology in anticipation of the Chinese government introducing tough emission rules including quotas that would reduce the availability of fossil fuels.

Though the Chinese government has not demanded an increase in EV production, all car-makers in the country are under pressure to reduce vehicle emissions and, in turn, reduce the reliance of the country on oil.

But Reuters also said Daimler may not want another car-maker as a partner. It already has a strong business agreement and joint-venture company with BAIC called Beijing Benz. This makes models including the Mercedes-Benz C-Class, E-Class and GLC for domestic sale.

Geely has been an active purchaser of automotive businesses since its surprise 2010 acquisition of Volvo Cars from Ford. It has subsequently bought almost all of Lotus, the controlling share of Proton, English taxi maker London EV Company, and more recently a stake in Volvo Trucks.

It started Lynk & Co as a luxury small-car manufacturer with products aimed at the European market, and the Yuan Cheng New Energy commercial vehicle brand for future EV production.

By Neil Dowling

Mercedes-Benz EQA concept