Business / Auto China

Daimler support for partner's IPO plans in Hong Kong

By Han Tianyang (China Daily) Updated: 2013-01-21 07:57

Daimler AG is in talks with local partner BAIC Group to become a shareholder in the company's passenger car unit expected be listed on the Hong Kong stock exchange this year.

"BAIC is planning the IPO of its passenger car division and we will support that intention," Dieter Zetsche, chairman of Daimler, told the media at the Detroit auto show last week.

"We are currently negotiating what the framework would be and what our role would be," he said.

Reuters cited sources with information of the possible transaction saying that Daimler plans to take a 10 to 20 percent stake in BAIC's passenger car division, but the size of the share is still under discussion.

BAIC Group's passenger vehicle arm BAIC Motor Co was established in 2010 for the special purpose of a stock listing.

BAIC Group has a 51 percent stake in the subsidiary while Shougang Group, one of China's top steel makers, is the second-biggest shareholder with 18.31 percent.

BAIC Motor's assets include the parent company's 50 percent stake in a joint venture with Hyundai and the group's own-brand business unit, an automotive research institute and its new energy and powertrain units.

The group also plans to inject its 50 percent stake in the joint venture with Daimler into the subsidiary for the planned IPO.

Xu Heyi, president of the Beijing-based auto group, said last September that BAIC Motor expects to be listed in Hong Kong in 2013 to raise 10 billion yuan for further development of its own-brand business.

Analysts said that Daimler's intention to a buy stake in BAIC Motor is a signal it wants to strengthen the relationship with its Chinese partner.

A stake in a fast-growing, low-cost carmaker could also prove to be strategically important in the long run, they said.

But some in the industry expressed concern that Daimler's plan to buy a stake in BAIC might violate the government policy stipulating foreign partners can have no more than a half ownership share in a Sino-foreign auto joint venture.

Daimler and BAIC already have a 50-50 joint venture, Beijing Benz Automobile Co, making Mercedes-Benz cars. If Daimler buys stock in BAIC, it then will have more than half of the partnership unless BAIC raises its stake in Beijing Benz first, they said.

Daimler currently lags behind Audi and BMW in China's premium car market. Sales of its Mercedes-Benz, smart, AMG and Maybach cars last year totaled 206,150 units, only half the number of vehicles Audi delivered and more than 100,000 behind the tally of BMW.

In December the company appointed a new board member specially dedicated to its China operations. In the same month it also moved to unify sales management for both imported and locally made Mercedes-Benz cars to clear the way for accelerated growth in China.

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