Balancing act with major shareholders: Daimler's triangular Chinese relationship

The power struggle in Wolfsburg just seems to be pacified for the moment, when the focus is on the next German car company.

While the conflicts in the Volkswagen group are reminiscent of the drama at court - the rich Porsche and Piëch families, a powerful sovereign Stephan Weil and the rebellious representative of the working class Daniela Cavallo - those of Mercedes take place in secret and yet in the middle of the world stage.

Hendrik Ankenbrand

Business correspondent for China based in Shanghai.

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Julia Löhr

Business correspondent in Berlin.

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Susanne Preuss

Business correspondent in Stuttgart.

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Gustav Theile

Editor in business.

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It is a complicated German-Chinese triangular relationship between the Swabian auto icon, which has just parted with its truck business, and its two major Chinese shareholders: the Beijing state-owned Baic and billionaire Li Shufu's private auto company Geely, which includes the Volvo brands , Polestar or Lotus belong.

And then the new German government and the Chinese state are involved in the background.

If you are looking for a genre for this, you will probably find it in diplomatic thrillers.

A message to Baerbock?

Until a week ago, Li Shufu was the largest shareholder in Daimler AG, which will soon be renamed Mercedes-Benz. Li has held a 9.69 percent stake for almost four years. Since then, a number of collaborations between Geely and Mercedes have been established: Smart is a joint venture between the two of them, the next generation of the small car will be produced entirely in China. Together they are investing in the air taxi start-up Volocopter and for the long-term future of the combustion engine in some countries, both of them offer a common engine.

But the picture changed abruptly when Baic revealed last Monday that it is the largest shareholder with a Daimler stake of 9.98 percent - and has been since 2019. Officially, five percent were previously known. In Stuttgart, the split of the group was cited as the reason for the sudden transparency. In fact, not a few believe that the real reason is to be found in Berlin, where the new Foreign Minister Annalena Baerbock (Greens) had just been sworn in. The Chinese government reacted relatively cautiously to their statements shortly before taking office. According to some observers, the Baic publication was a subtle hint of how closely the Chinese and German economies are intertwined. A message from Beijing to Baerbock,This is how analyst Jürgen Pieper from Bankhaus Metzler describes it: "This is our partner, it doesn't create too much wind."

The CP and China also earn money

Because Baic is not just any state-owned company.

Behind it is none other than the Communist Party (KP) of the capital Beijing.

Baic and Daimler have been a couple for a long time.

They have been cooperating for more than 20 years.

There is a joint venture with sales of almost 24 billion euros.

All Mercedes production in China runs at Baic, and the Beijing plant is the largest Mercedes plant in the world.

Overall, more than every third Mercedes is sold in China.

But Mercedes is the smaller partner with 49 percent.

It is an open secret that the Stuttgart-based company want to increase their stake to 65 percent. The model is BMW, which holds the majority in its Chinese joint venture. Mercedes would have to pay billions for the implementation of its plan - also to compensate for the enormous loss of importance for Baic. Because the sale of Daimler cars is currently the only bright spot for Baic boss Jiang Deyi. In his first year, the manager, who actually comes from the real estate and construction industry, has to be responsible for a sharp drop in sales for his own brands. The Baic electric cars are selling poorly. The company has lagged behind state competitors such as VW partner FAW since the Chinese auto industry flourished around the turn of the millennium.Above all, the sale of cars with the German star is responsible for the Baic profit. The Germans understand Chinese needs: When the microphone is off, Daimler managers like to claim that it is only understandable if the CP and China want to earn money from Daimler's good profits in their country.