Is BAIC willing to be the next Brilliance?
Author: Liang Zhihao
Since the state announced the relaxation of the restrictions on the share ratio of joint venture car companies, major foreign brands have begun to move. BMW, which has always been strong, took the lead in firing the first shot, directly acquiring the Brilliance China brand, so that Brilliance, a joint venture partner that was once equal to itself, has completely become its own foundry in the Chinese market.
Other weak brands, such as GAC FCA, were unilaterally announced by THE STARELANTIS Group to change their shareholding without the knowledge of the Chinese side, staging a contemporary palace fight farce. The abandoned wife of the chaff and the poor couple Pepsi Lament, BMW Brilliance and GAC FCA have explained to us with their personal experience the importance of having the right to speak in the joint venture.
In fact, after BMW's official action, many people speculated whether Mercedes-Benz would also make the same move to seek higher profits in the Chinese market. Because in the eyes of many people in the industry, today's Beijing Benz, whether it is the market situation or identity, actually has many similarities with the original Brilliance.
Rumors abound
Earlier this month, a person familiar with the matter broke the news to the financial media that Mercedes-Benz's increase in the shares of Beijing Benz will most likely be completed this year, and the negotiations between the Germans and BAIC have been basically completed.
However, when the media asked Mercedes-Benz China and BAIC Group for verification, the other party did not know what to ask.
At present, the shareholding structure of Beijing Benz is still relatively "clear", of which BAIC Motor accounts for 51% of the shares, Daimler shares and Daimler Greater China Investment Co., Ltd. account for a total of 49% of the shares, in other words, the Chinese side is still the active party in the Beijing Benz joint venture.
However, the high proportion of equity does not mean that BAIC can have an absolute right to speak, as the second highest-selling luxury brand in the Chinese market, Beijing Benz is the most important source of profit for BAIC Group. According to the announcement issued by BAIC Group, last year, the total revenue of BAIC Group was 22.809 billion euros, of which Beijing Benz accounted for 21.288 billion euros, accounting for 93.3%.
If only profits are taken into account, after the profits of Beijing Benz are removed, the entire BAIC Group will generate a loss of up to 1.337 billion euros. It is no exaggeration to say that Mercedes-Benz is to BAIC, just like BMW was to Brilliance, once the loss of Mercedes-Benz' profit cow, the entire BAIC Group will be in crisis.
Mercedes-Benz, all chicken ribs?
The reason why BAIC Group will fall into this situation is not unrelated to their weak performance in other sectors. In terms of joint venture brands, as the most important joint venture brand outside of Baiqi Group's Mercedes-Benz, Beijing Hyundai's market performance has deteriorated, with total sales of only more than 380,000 vehicles last year, only 68% of the sales target, and a loss of 4.995 billion yuan.
At the same time, the market performance of BAIC Group's own brands and new energy brands is also not optimistic, especially their investment in a huge high-end new energy brand ARCFOX Polar Fox, not only the sense of market existence is weak, but also due to the need to continuously invest funds in marketing and research and development, it has become a profit black hole of BAIC Group.
Outside of Beijing Benz, the lack of its own core technology and profit points has become the biggest potential crisis for BAIC Group. If the downturn of Beijing Hyundai can also throw the pot to the overall downturn of Korean cars in the Chinese market, then the performance of the independent brand plate can only be said to be BAIC's "self-inflicted".
If Mercedes-Benz successfully completes the increase in holdings of Beijing Benz, the most intuitive impact may be more than the product level. Once BAIC is no longer the dominant party of Beijing Benz, this means that Beijing Benz will no longer be included in BAIC's financial statements, and BAIC Group may fall out of the "World's Top 500" sequence. But for the product level, a Beijing Benz led by Mercedes-Benz may not be a bad thing.
However, unlike Brilliance's "lying flat", BAIC still has the strength to struggle, after all, BAIC Group still owns 9.98% of the Mercedes-Benz Group and is the group's largest shareholder. At the same time, Mercedes-Benz also owns 9.6% of baiqi shares, and the cross-shareholding of the two sides also leaves enough room for BAIC Group.
At least, a collapse like Brilliance's should not happen to BAIC again.
Why mercedes-benz is so excited
As one of the most profitable luxury brands in China, why has Mercedes-Benz always been obsessed with the shares of Beijing Benz? First of all, after seeing that its biggest competitor BMW has taken the lead in entering the state of "quasi-sole proprietorship" and successfully winning the luxury brand sales crown, Mercedes-Benz is obviously unwilling. Although from the perspective of sales, Mercedes-Benz's performance in the Chinese market is not bad, accounting for 38% of the group's global sales, but in terms of revenue, the Chinese market only contributes 15.1%, which is seriously inconsistent with sales, and the biggest reason is that the partner BAIC Group has divided half of the profits.
This is also the main reason why Mercedes-Benz has been eyeing the "North Ben" shares, in 2019 they expressed their willingness to increase the share ratio to 75%, but this plan has not been realized. Bmw, on the other hand, successfully increased its stake in BMW Brilliance to 75% in 2018, becoming the first joint venture car company with a foreign stake of more than 50%, and BMW's move is expected to bring more than 7 billion euros of cash flow to the BMW Group, making the overall finance of the BMW Group "more beautiful".
After all, whether it is Mercedes-Benz or BMW, under the influence of the trend of electrification, they have spent a huge amount of money to invest in the research and development of electric vehicles, and increasing the proportion of shares in addition to improving brand profits, more importantly, it is more important to enable these overseas brands to realize their own electrification plans in this largest new energy vehicle market with a more free attitude.
For BAIC Group, after seeing brilliance's end, the alarm bell is actually going to ring. Recall that when Brilliance announced the sale of 25% of its shares, its then chairman Qi Yumin swore: "The benefits obtained by Brilliance in the future 25% of the shares will definitely be greater than the current 50%!" "But the result is obviously not like this, after occupying the dominant position, Brilliance completely reduced to BMW's foundry in the Chinese market, and in the end can only end in bankruptcy."
And this, I believe, must not be the result that BAIC wants, right?
(Some image source network)
Today's topic
Will BAIC be the next Brilliance?
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