BAIC set to be a major Daimler shareholder

Shareholders arrive for Daimler's annual shareholder meeting in Berlin on April 1. The company is expected to enter into a cross stock-holding agreement with BAIC. [Photo/Agencies]

Automakers in final stage of cross-holding agreement negotiations

Hong Kong-listed BAIC Motor is expecting to make history in China's auto sector, as it is in the process of becoming the country's first automaker to form a crossholding alliance with an international auto group.

China's fifth-largest passenger automaker by volume is the final negotiations to become a shareholder of the German auto giant Daimler AG by the end of 2015, said its chairman Xu Heyi.

Daimler is currently BAIC Motors' third-largest shareholder, holding a 10 percent stake.

The shares BAIC plans to buy "will not be a small amount", said Xu on Aug 24, at an event to mark the 10th anniversary of Beijing Benz Automotive Co, a joint venture between BAIC Motor, Daimler AG and Daimler Greater China.

The share purchase plan is part of a series of agreements Daimler and BAIC signed in 2013 to strengthen their cooperation.

Also among the agreements is a plan for BAIC to increase its shares in Beijing Benz Automotive Co from 50 percent to 51 percent, and Daimler to increase its stake in Beijing Mercedes-Benz Sales Services Co from 50 percent to 51 percent.

The usual pattern for Chinese and foreign joint ventures is 50:50.

Daimler said in an announcement that it has a very close alliance with BAIC.

"We want to continue to be attractive for potential long-term investors. Therefore, we are also welcoming investors from China," Daimler said in its announcement.

Zhang Yu, managing director of Automotive Foresight (Shanghai), said, "It is a good thing for both of them, and it will make the two companies' future cooperation go smoother."

According to Zhang, becoming a shareholder of Daimler is a "strategic investment" for BAIC, and the company will benefit from it by getting cheaper technology transfers and faster introduction of new products from Daimler.