According to the news report by Bloomberg, Chinese billionaire Li Shufu’s Zhejiang Geely Holding Group Co. is carrying out negotiations with Daimler AG, the German company in which Li had silently bought an almost 10% stake earlier this year.
The current negotiations revolve around setting up a partnership between the two companies to create a ride hailing as well as car-sharing service in China. According to internal sources that are familiar about this topic, the two companies are discussing a 50-50 joint venture which would compete with the current market leader in this space, Didi Chuxing.
According to the sources, Daimler is planning to use its electric car brand Denza, which is a joint venture with BYD Co., a Warren Buffet backed company.
However, the sources cautioned that these discussions have not yet been finalized.
This new venture would target a market that is rapidly expanding, offering new types of transport services, but has been so far dominated by technology companies such as Uber Technologies Inc. and Didi. As autonomous driving technologies and car-sharing threaten to turn the traditional concept of auto ownership on its head, automakers across the globe are scrambling to get in on the new technologies in the market.
According to the Chief Executive Officer of Shanghai advisory firm, Automobility Ltd., Bill Russo, Li’s acquisition of a majority stake in Daimler had a very clear logic and strategic rationale. And now, the new joint venture only underlines that fact.
In the last 8 years, Li’s Geely has acquired a veritable stable of the world’s most well know auto brands such as Volvo, Lotus, London Black Cabs and, with its stake in Daimler, Mercedes-Benz.
A joint venture such as this would strengthen the relationship between the two companies. Li stated that his investment in Daimler is the basis of partnerships that are needed in a time when traditional vehicle makers can longer go solo when faced with the intense competition brought to the table by the new entrants using new technology.
On the other side of the coin, foreign auto makers like Daimler, Volkswagen AG, Toyota Motor Corp., to name a few, are looking for a way to enter the transport services space that is changing the way people now use vehicles.
In fact, according to Russo as well as other market analysts, China – the world’s largest car market – may stop its nearly 3-decade growth in the car market because consumers are changing from being vehicle owners to ride-sharers.
Daimler has been lucky as it has had greater success in the mobility market than many other automakers. The German company has gained some traction with its ViaVan, MyTaxi and Car2Go. ViaVan is a ride-pooling service, and MyTaxi is a ride-sharing app, while Car2Go is a car-sharing platform. Car2Go is now being incorporated with BMW AG’s DriveNow.
The German companies are not the only ones in the race, though. The world’s most valuable auto maker, Toyota is also maneuvering into position in this new auto market fast. The Japanese automotive giant has already bought stakes in Uber as well as its South East Asian competitor Grab. The company is also reportedly in talks with China’s Didi.
Toyota is also targeting Europe as it expands its car-sharing services. The Japanese company has joined hands with SoftBank Group Corp. in a venture that would focus on developing ride-hailing as well as self-driving tech.
Geely’s shares went up by 1.6% on this news, taking the Chinese company’s market value up to HK$122 billion (~$15.6 billion). Daimler’s shares, on the other hand, fell by 0.3% in Germany, taking the car maker’s market capitalization to €58.2 billion (~$67 billion).