Germany’s Daimler Seeks Venture with China’s Geely

The Daimler is seen during a press conference on the second press day of the Paris auto show, in Paris, France, October 3, 2018. (Photo: REUTERS/Regis Duvignau)

Recent reports claim that German auto manufacturer Daimler AG is currently in talks with Geely, a multinational auto corporation based in China. According to reports, Daimler is seeking to setup a joint venture with Geely as part of its effort to establish a car sharing and ride hailing service in China.

According to a report published by Bloomberg, both Daimler and Geely will have a 50:50 stake on the said venture. Bloomberg cited people with insider knowledge about the deal claiming that Daimler is adamant to take on China's biggest ride hailing platform Didi Chuxing, on the latter's home turf no less.

In a statement during the Paris Motor Show last week, Daimler Chief Executive Officer Dieter Zetsche confirmed that the company is in talks with Didi Chuxing and that the venture poses more potential for both companies rather than risks involved. He added that the company's projected situation in China is very promising.

Daimler and Geely aims to create an alliance that will eventually challenge industry leaders like Didi and Uber. According Automobility, a Shanghai-based advisory firm, the joint venture is considered as one of the first step of the collaboration and that it is a good step towards a better strategy.

A joint venture with Geely will not be Daimler's first foray into the Chinese auto market. The company already has an outstanding partnership with BYD, a Chinese electric car marker. The company also owns a stake in Beijing Automotive Group's electric car unit.

It is important to note that Geely has purchased a stake in Daimler. The Chinese car manufacturer aims to make it big in the electric and autonomic vehicle sector, hence the alliance with the German auto manufacturer. Geely, which is a subsidiary of Zhejiang Geely Group, purchased a 10 percent stake in Daimler. The deal was finalized in February.

In a report from the Nikkei Asian Review, both Daimler and Geely are on the final stages of the talks. Some market observers have also stated that the two companies should be able to ink the deal before the end of the month.

In terms of market performance, the reported planned venture with Daimler have a positive impact on Geely's stock prices. Based on the latest market data, Geely's shares improved by as much as 6.6 percent on Wednesday. This increase pegged Geely as one of the best performers on the Hang Seng index.

As of this writing, Geely has yet to comment about the reported deal with Daimler.

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