Daimler Beijing investment further strengthens Sino-German economic ties

BERLIN - German luxury carmaker Daimler announced on Monday that it will significantly expand automotive production in China with its locally-based business partner Beijing Automotive Industry Holding (BAIC).

In a company statement, Daimler outlined plans to invest 1.5 billion euros ($1.84 billion) with BAIC to grow their manufacturing joint venture Beijing Benz Automotive Co Ltd (BBAC).

Among other goals, BBAC will employ these funds to establish an additional production location for "high-quality premium vehicles" at the Beijing Yizhuang industrial park as part of its "Made in China, for China" commitment.

The Stuttgart-based carmaker also emphasized that it would direct more resources to the development of "new energy vehicles" (NEVs) in order to comply with strict environmental regulations which will enter into force in China by 2019.

"Local production is a strong pillar of our sustainable development in China. By deepening our cooperation with our local partner BAIC, BBAC will continue playing a key role for Mercedes-Benz in China," said Hubertus Troska, member of the board of management of Daimler AG.

Monday's corporate announcement was made just a few days after Daimler revealed that Chinese billionaire and Geely-owner Li Shufu had become the single largest Daimler shareholder by acquiring 9.69 percent of its stocks for 7.5 billion euros ($9.2 billion).

Reactions in the German media were mostly positive with business newspaper Handelsblatt saying that "Daimler should be open towards the Chinese major shareholder".

Another comment in the conservative newspaper Frankfurter Allgemeine Zeitung was headlined "Cause for concern? Not really", while the Mannheimer Morgen ran the headline "Don't be afraid of the investor".

Daimler was welcoming of Li Shufu's entry as shareholder.

"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 carmaker said in a press statement.

The document further emphasized that "Daimler knows and appreciates Li Shufu as an especially knowledgeable Chinese entrepreneur with clear vision for the future, with whom one can constructive discuss the change in the industry."

Similarly, labor representatives on Daimler's supervisory board were upbeat about the prospects for cooperation between their company and the Geely-owner.

"Our expectation of Li Shufu is that he has a long-term interest in Daimler and wants to continue to develop our company together with its employees," the statement read.

Michael Brecht, president of Daimler's general works council, noted that Geely's acquisition of Volvo had resulted in the successful renewal of the Swedish carmaker.

Li Shufu has expressed the view that traditional carmakers will only be able to withstand commercial challenges from new contenders such as Tesla, Google and Apple, if they form alliances. According to German media reports, the Chinese investor is particularly interested in cooperating on autonomous driving and electric mobility solutions with Daimler.

From this perspective, Daimler's involvement in multiple joint-ventures with Chinese partners is above all reflective of a challenging industrial environment.

China is already the single largest market by sales for Daimler and its German rival Volkswagen. Figures released on Friday by the Federal Statistical Office showed cars were the most valuable German exports in 2017, underscoring the growing importance of German-Chinese trade for overall economic growth.

Berlin and Beijing have both adopted complementary "Industry 4.0" and "Made in China 2025" strategies in response to the challenges and opportunities created for manufacturing businesses by automation, leading to intensified industrial cooperation.

China is also the world's foremost renewable energy producer, another area where the interests of German and Chinese policymakers to transition to a greener economy overlap.

China and Germany have increasingly looked to each other as partners in international forums. The same holds true for trade policy.

On one hand, Chinese imports have helped Germany reduce size of trade surplus. On the other hand, Sino-German cooperation on industrial technology and German exports of high-value added products have contributed to China's transition from an export-oriented growth to a more consumption-driven growth.