Daimler aims for China impetus with BAIC Motor stake

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Reuters first reported of Daimler's intention to purchase an equity stake last month.

Mainly because of difficulties in China, Daimler's Mercedes-Benz brand is now the smallest of the big three German luxury carmakers after BMW and Volkswagen's Audi, which together dominate the global market for high-end saloons and SUVs.

INCREASE VOLUMES

After admitting in July that its poor sales in China were more than just temporary, Daimler has moved aggressively to bolster its fortunes there and plans to increase annual volumes by half to 300,000 vehicles in 2015.

In December, Daimler brought in a new sales chief for China, appointed a new management board member responsible solely for its Chinese operations and in December unified its two competing sales channels for locally built and imported cars.

"There's been a lot of talk about Mercedes falling behind, but you can see in the way the deal with BAIC Motor is structured, also in terms of the governance, that this is a very strong signal Daimler really means business in terms of China," said a source with knowledge of the deal.

Daimler is not BAIC Motor's only partner, however. Hyundai also operates a joint venture with the Beijing-based company even if the mass market Korean carmaker does not directly compete with Mercedes.

"Daimler will be the lead automotive investor and partner for BAIC Motor, no other carmaker like Hyundai is going to come in on this IPO that they're planning. This is so important strategically because there will be a wave of consolidation in the automotive industry in China," the source said.

"There's around three dozen manufacturers there currently and Daimler doesn't want to wait to see how things play out but actively shape it, strengthening the position of its partner."

Chinese parent group Beijing Automotive Group Co Ltd. is planning to take BAIC Motor public after the Daimler transaction clears, with the proceeds used to further bolster its own Chinese brand of passenger cars to be known as "Beijing", which greatly lags its domestic rivals.

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