China’s sovereign wealth fund is reportedly looking to acquire a significant stake in Daimler AG, the German parent of automotive brands Mercedes-Benz and Smart.
A report in the well-placed Communist Party newspaper the Peoples Daily is citing anonymous sources indicating that the China Investment Corp. is negotiating the purchase of as much as 10% of the German manufacturer.
The news sent Daimler shares soaring in European trading – even though a company official declined to comment on “media speculation.” But that spokesperson also noted that maker “always welcome(s)” discussions with “any new investors.”
The Mercedes brand has made a major push into China in recent years, industry analysts projecting the market could soon become the world’s largest for luxury cars. Meanwhile, Daimler Chief Executive Dieter Zetsche has openly stated his interest in attracting new long-term shareholders, particularly from China.
That could serve as a replacement for the Abu Dhabi state investment arm, Aabar Investments, which last year sold off its remaining stake in Daimler AG. A Kuwaiti fund, meanwhile, continues to hold a 7.6% stake in the German company.
Daimler recently installed a new chief executive for its Chinese operation and, significantly, it assigned Hubertus Troska a seat on the company’s board.
But not everything has gone entirely smoothly for Mercedes in the booming Asian nation. As sales there took an unexpected tumble in mid-2012, the luxury brand was forced to take substantial price cuts, reportedly as much as 25% on some models facing particularly stiff competition.
Nonetheless, China – along with the U.S. – is seen as critical for Daimler in its bid to offset the decline in its home European market, where automotive sales are expected to approach near two decade-low levels in 2013.
Worldwide, despite boosting sales 4.7% last year, Daimler slipped to third place among luxury makers behind German arch-rivals BMW and Audi. BMW also ended the year as the number one high-line brand in the critical American market, narrowly beating out Mercedes.
Zetsche has set a goal of regaining the global luxury sales crown by 2020. As part of that strategy, the company is rapidly expanding its global partnership with the Renault-Nissan Alliance. The three are jointly developing an array of new products – including a replacement for the current Smart fortwo model. Mercedes may also build a new assembly plant in Mexico alongside a new Nissan factory, TheDetroitBureau.com has reported.
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