Increasing the holding of Daimler shares and binding long-term cooperative relations through cross-shareholding is a trick sacrificed by BAIC in the face of the post-joint venture era.
On December 13, BAIC Group announced on its official website that it has held 9.98% of Daimler's shares in 2019. At the same time, Daimler holds 9.55% of the shares of BAIC Group listed in Hong Kong (BAIC Motor) and 2.46% of the shares of BAIC Group in the A-share listed company (BAIC Blue Valley).
In the announcement, BAIC Group wrote that the increase in holdings further reflects the trust of BAIC Group in Daimler Group, and also reflects the support of BAIC Group as a long-term investor to Daimler Group. BAIC Group values the unique strategic and economic importance of the partnership and is confident in the enormous potential of Mercedes-Benz in the future transformation process.
It is worth noting that at this time, there are less than two months to go before the timeline of the opening of the full equity ratio of China's automobile industry to foreign investment will come. Some people say that BAIC can quietly hide its 9.98% stake in Daimler for two years, and only announced the news at the critical line of opening the joint venture share ratio, indicating that the game of power, market and interests involved behind it must be particularly intense.
"You have me", BAIC needs Daimler
In April 2018, the National Development and Reform Commission said it would remove the restriction on foreign ownership of passenger cars (no more than 50% of foreign ownership) in 2022, and the restriction on no more than two joint ventures.
After the announcement of the policy of opening up the joint venture share ratio, BMW took the lead in completing its increase in BMW Brilliance, and BMW's shares increased to 75%. Volkswagen successfully held a 75% stake in JAC Volkswagen in the first half of this year. In this way, among the top three Germans, only Daimler has not yet broken through the stock ratio limit.
It seems only a matter of time before Daimler increased its stake in Beijing Benz, after news that Daimler was preparing to restart negotiations with BAIC on increasing its stake in Beijing Benz, planning to increase its stake in Beijing Benz from 49% to 75%.
In the new situation, the fate of Beijing Benz and the fate of BAIC are closely related. At this time, it becomes the major shareholder of Daimler, on the one hand, BAIC can lock interests through share hedging and maintain the development of Beijing Benz; on the other hand, it can strategically contain Geely's influence on the daimler board of directors, and through further interest bundling, avoid leading to its own edge because of Daimler's ambiguous relationship with Geely and BYD.
First of all, BAIC needs Daimler and Beijing Benz.
This is related to BAIC's current market performance. From the sales side, BAIC's own brand business is grim, and Beijing Benz is an important pillar of BAIC Group.
According to data from the Association of Automobile Manufacturers, the cumulative sales volume of BAIC Motor's own brand business from January to October this year was 50,302 units, down 17.2% year-on-year. In terms of sales of new energy models, from January to October, the cumulative sales volume was 19,656 units, down 15% year-on-year.
The cumulative sales of Beijing Benz in the first 10 months of this year were 458,410 units, an increase of 4.83% year-on-year.
The first-half results of BAIC Motor Co., Ltd. announced on the Hong Kong Stock Exchange also directly illustrate the importance of Beijing Benz to itself.
According to the financial report released by BAIC, BAIC achieved revenue of 90.375 billion yuan in the first half of the year, an increase of 16.08% compared with 77.854 billion yuan in the same period last year; achieved a net profit of 2.758 billion yuan, an increase of 163.67% year-on-year. At the same time, Beijing Benz's revenue reached 88.059 billion yuan, up 17.5%, contributing 97.4% to the total revenue of BAIC.
At the critical point of opening up the joint venture share ratio, BAIC chose to continue to increase its stake in Daimler, to a certain extent, to strengthen the deep bundling with Daimler, thereby creating conditions for the formation of a longer-term strategic cooperation.
On the other hand, BAIC has become Daimler's largest shareholder by increasing its holdings, in order to stabilize its position in multilateral relations.
In February 2018, Daimler Group announced that Geely Group had acquired 9.69% of Daimler for about $9 billion, becoming the largest shareholder of Mercedes-Benz parent company Daimler.
In 2019, BAIC Group ranked fifth among Daimler Group shareholders with a 5% stake. The top four are: Tenaciou3 Prospect Investment held by Li Shufu 9.69%, Kuwait Investment Sovereign Fund held 6.84%, Bank of America held 5.13%, and BlackRock held 5.01%.
Since then, the cooperation between Daimler and Geely has been deepening.
In October 2018, Geely announced cooperation with Daimler in the field of high-end mobility; in March 2019, Geely and Daimler each invested 2.7 billion yuan to form smart Automobile Co., Ltd., a global joint venture for the smart brand; in May 2019, Geely Technology Group Co., Ltd. and Daimler Mobility Services jointly established a joint venture company "Weixing Technology Co., Ltd.", each holding 50% of the shares...
The analysis believes that in this competition, based on the vigorous development of Geely now, BAIC should strive not to let itself be gradually alienated and forgotten in this multilateral relationship, and guard its own acre and three points of land.
For BAIC, which adheres to the "high-tech special", the cooperation with Mercedes-Benz is an important starting point in the high-end market and cannot be lost.
"I have you", Daimler transformation needs profit replenishment
Daimler welcomed BAIC's stake increase and regarded BAIC as a long-term partner. Daimler also needs Beijing Benz, a profit "cow".
As one of the world's largest luxury car manufacturers, the Chinese market has become Daimler's most important market, and the importance of Beijing Benz to Daimler is self-evident.
The most direct manifestation is the calculation of the financial statements according to the equity method, and if the control of the joint venture company Beijing Benz is realized, Daimler can incorporate its revenue in the financial statements and increase the revenue scale of the entire group. At the same time, the increase in the share ratio will also allow the Daimler Group to get more profit distribution.
It is worth mentioning that Daimler is currently in a period of deep transformation, and a large amount of research and development investment needs more "blood" supplies.
Remember that around 2018, in order to meet electrification and digital transformation, Mercedes-Benz had to start a large amount of research and development investment. In 2019, Daimler's net profit was cut from the waist, falling sharply by 64.5% to 2.7 billion euros, the biggest decline in a decade. At the same time, the Daimler Group lost nearly 5 billion euros as a result of events such as diesel emission gates and Takata airbag recalls.
Since the second half of 2019, Daimler has begun to "slim down", and Kang Linsong, chairman of the board of directors of Daimler AG and Mercedes-Benz AG, has had to start measures to cut costs and increase cash flow. These include significant reductions in material and administrative costs, as well as a reduction of more than €1.4 billion in labor costs by the end of 2022 and a reduction in jobs, including management positions.
In contrast, the market performance of Daimler's joint venture in China, Beijing Benz, has been trending towards steady growth, and even in 2019, when Daimler's loss was the most serious, its performance in the Chinese market reached 364 million euros.
For Daimler, which is currently in a period of transition, it is undoubtedly beneficial to stabilize its own revenue and profits by increasing its stake in Beijing Benz.
A few days ago, Daimler said that in October 2020, the company announced that it would cut capital expenditure by 20% from 2019 levels by 2025, and this plan is still valid. While the company plans to reduce capital expenditures, R&D spending on the electrification portfolio and digitalization will remain at a high level, including autonomous driving. Mercedes-Benz will strive to achieve a leading position in the field of electric vehicles and automotive software.
In order to transition to a software-driven and emission-free future, on December 2 this year, the Daimler Supervisory Board approved a mercedes-Benz strategic business plan for electrification for 2022-2026, which will invest more than 60 billion euros ($68 billion) for Mercedes-Benz.
In turn, Daimler's achievements in electrification may also become the capital of the BAIC Group.
Recently, foreign media quoted informed sources to report that Daimler subsidiary Mercedes-Benz plans to produce a new pure electric model exclusively in China in 2024. If sold successfully, the model is expected to be exported to other markets around the world. Some analysts believe that Daimler's new products in the field of pure electricity can be regarded as a new chip for its acquisition of the equity of Beijing Benz.
Che Yun Summary:
2022 is destined to become an extremely important year in the history of China's automotive industry. The policy of liberalizing the joint venture share ratio will bring a series of chain reactions to enterprises and the market.
For China's strong independent car companies, it is time to break the wrist with the global giants.
For enterprises that rely on the profit transfusion of joint ventures, how to find their own survival rules in the post-joint venture era will also be crucial.
2022, wait and see.