SHANGHAI/FRANKFURT -- By purchasing the largest stake in Daimler, China's Zhejiang Geely Holding Group likely hopes to benefit from the German automaker's technologies and solidify its position in the intensifying global race to develop the vehicles of the future.
Geely's nearly 10% stake in the owner of the Mercedes-Benz brand puts it in position to begin talks with Daimler for a technology alliance, especially in the area of batteries, a key technology for electric vehicles, which the Chinese government has been pushing.
Geely has so far been at a disadvantage in terms of the scale of its business and the level of its technology. The acquisition gives it a much needed competitive lift in the evolving technological environment, which has also been driven by non-auto companies such as Google.
According to documents disclosed by Daimler, Geely founder and Chairman Li Shufu bought a 9.69% stake in the company, making him the top shareholder. The purchase is estimated to be worth 7.3 billion euros ($8.97 billion).
"Daimler is pleased to announce that with Li Shufu it could win another long-term-orientated shareholder, which is convinced by Daimler's innovation strength, the strategy and the future potential," the company said in a statement.
China's Hurun Report, which tracks the country's wealthiest people, puts Geely's Chairman Li in 10th place, with assets totaling 110 billion yuan ($17.4 billion) in 2017.
According to media reports, Geely initially approached Daimler last autumn and suggested Daimler issue new shares for it to buy, but the proposal was rejected. Li subsequently bought Daimler shares on the open market through an investment company.
It has also been reported that Li may visit Germany this week to start talks with Daimler management.
But how keen Daimler management is to work with Geely is unclear. Daimler does not appear to have much to gain from a technology tie-up.
Daimler plans to introduce over 10 electric vehicle models by 2022, with total spending of about 10 billion euros. It has announced plans to manufacture electric vehicles through a joint venture in China with local partner Beijing Automotive Group, also known as BAIC Group.
Geely, on the other hand, could get what it wants out of talks if Daimler decides a tie-up would help it expand its footprint in China, the world's largest auto market. Geely's sales in 2017 totaled 1.25 million vehicles, up 63% from a year earlier. The company aims to sell 1.58 million vehicles this year.
Such a scenario could have a significant impact on the current arrangement of strategic alliances in the area of new technologies and development strategies.
Daimler is already in a cooperative relationship with the alliance between Japan's Nissan Motor and France's Renault. A Chinese joint venture between Nissan and a local automaker also announced a plan this month to invest about 60 billion yuan ($9.46 billion) to introduce over 20 electric vehicle models.