China is beginning to assert its roles as an investor in the global automotive industry through the increased pace by which they are making purchases in the car and heavy vehicle sector. Combined with the fact that the country has already established itself as a key market for global automotive manufacturers, China’s influence on the industry only continues to grow.
Billionaire Li Shufu’s Zhejiang Geely Holding Group was a pioneer, acquiring Volvo Cars from Ford Motor in 2010. After that, it took almost four years until another Chinese firm again considered the sector, when Dong Feng Motor participated in a capital increase of Peugeot and received a stake of about 14 per cent in return.
The single largest investment came in 2018 when Geely bought Daimler for approximately US$9 billion, gaining around 9.7 per cent of the company, in addition to making it the single biggest shareholder in the German luxury car company.
BAIC also made purchases in Daimler, making it the third largest shareholder, as well as the biggest strategic investment by a Chinese government entity into a global car manufacturer.
“Two Chinese companies having interest in the same foreign carmaker shows that Chinese companies are interested in investing in strong foreign brands,” said Rachel Miu, a Hong Kong-based analyst at DBS Group Holdings in Hong Kong. Though the China-US trade war is making it hard for firms to do so, Chinese companies aren’t going to give up on their plans to globalise, she said.
The investment into Daimler is paving the way for China’s industrial kingpins to obtain better access to high-tech automotive innovations during a time where China’s own automotive market is experiencing a long slump. This provides local companies incentive to look to foreign options for growth.
Closer ties between automotive giants such as Daimler and BAIC could result in firms being able to pool resources as the industry shifts toward electric and self-driving cars. As a result, traditional carmakers may feel threatened by this shifting paradigm while technology companies such as Baidu and Tencent Holding are making a push into autonomous vehicles.
“The deal improves the ties between BAIC Group and Daimler,” said Toliver Ma, an analyst at Guotai Junan International Holdings in Hong Kong. “We expect more strategic cooperation between the two companies.”
Affiliation with Western brands gives Chinese companies potential credibility as they seek to win over consumers in Europe and the US down the road.