2-25-18 8:59 AM EST | Email Article
By William Boston and Robert Wall 

BERLIN -- The billionaire chairman of Chinese car maker Zhejiang Geely Holding Group Co. has accumulated a 9.7% stake, valued at about $9 billion, in Germany's Daimler AG, the biggest overseas investment yet by China Inc. in the West's automotive industry.

The move by Li Shufu, referred to by associates as Chairman Li, is his most ambitious so far as he tries to create a global Chinese auto maker that can compete with industry heavy hitters Volkswagen AG, Toyota Motor Corp. and General Motors Co. Geely bought the Volvo car brand in 2010 and has more recently acquired stakes in car makers in Britain and Malaysia.

Mr. Li's investment in Daimler will likely give him a seat on the board and an inside perspective on Daimler's premier Mercedes-Benz car brand -- the company widely credited with inventing the automobile. Still, it is too early to say if the move is the first step in a more strategic alignment of Daimler and Geely Automotive that would give Geely access to Daimler's advanced technology in electric vehicles and self-driving cars.

The investment wasn't made directly by the company, which has bought into a series of foreign car companies in recent years as it simultaneously ramps up and upgrades its domestic car business, but by Mr. Li himself, according to a filing in Germany late Friday.

Geely said Mr. Li had no plans to acquire additional shares.

"The global automotive industry faces enormous innovation opportunities as well as challenges from nonautomotive companies in the 21st century," Mr. Li said in a statement posted on Geely's verified Chinese social-media account. "It is hard for individual car companies to win this war alone. In order to take the initiative to seize the opportunity, we must refresh our ways of thinking, join forces with friends and partners, and occupy technological commanding heights through synergy and sharing."

Daimler said it welcomed the investment as a "vote of confidence" in its future. The German car maker didn't say whether Mr. Li would get a board seat, but said it looked forward to discussing the investment with him.

The German government said Sunday that it saw no reason to intervene in the deal. "It is a business decision. Due to the character of the investment as a minority stake, there is no need to act in terms of competition rules or foreign trade rules," a government spokesman said in an emailed statement.

Nevertheless, Mr. Li will travel to Germany this week. He will meet Chancellor Angela Merkel's economics adviser, Lars-Hendrik Röller, for talks on Tuesday, according to people familiar with the situation.

Mr. Li isn't expected to meet Ms. Merkel, the people said, but it isn't clear if he will meet other government officials besides Mr. Röller.

A spokesman for Daimler declined to comment on German media reports that Mr. Li will lead a Geely delegation for meetings with Daimler CEO Dieter Zetsche and other company executives and directors.

The acquisition is the latest in a series of methodical bets that Mr. Li has made in his quest to transform Geely, once derided as the maker of low-cost, low-quality cars not fit for world markets, into China's first global automotive player.

Mr. Li's investment in Daimler is also another milestone for China. Within little more than a decade, China has evolved from a nation of bicycles to become the world's largest automotive market, with sales of 27.4 million new light vehicle last year. That compares with 17 million new cars sold in the U.S. and 20 million in Europe and Russia.

China has also become the world's biggest market for electric vehicles, a key technology for the future. Beijing has ambitions to leapfrog the West by developing trendsetting technology for electric cars.

After a humbling trip in 2007 to Detroit, where Mr. Li introduced the Geely brand to America, he turned his attention to building a global empire through acquisitions.

In 2010, when Ford Motor Co. was reeling from the financial crisis, Mr. Li bought its struggling Volvo Cars unit, based in Gothenburg, Sweden. Over the next few years, Mr. Li helped steer Volvo back to profitability, determined to make it a global premium brand.

After years of heavy investment from Geely, Volvo is now a thriving -- if still small -- high-end car maker. More recently, Volvo and Geely have pushed aggressively into electric-car development. Volvo promised last year to roll out electric or hybrid-electric engines in all its new models starting in 2019. Geely Holding in 2013 bought London Taxi, which makes electric-utility vehicles and taxis.

Back in China, Geely Automotive has become the top domestic brand in the country. Instead of turning out cheap and undependable models, it began drawing Chinese customers away from some of the big Western brands that had set up shop in China.

More recently, Geely put its overseas ambitions into high gear. In May 2017, it agreed to buy a 51% stake in British sports-car brand Lotus and a 49.9% stake in struggling Malaysian car maker Proton Holdings Bhd. In December, Geely acquired 8.2% of Volvo AB, the Swedish truck maker.

Hakan Samuelsson, the chief executive of Volvo Cars, describes Mr. Li as a strategic thinker who is carrying out a grand plan to create the first global player from China.

"What is the most credible Chinese global brand? Three years ago, no one would have thought it would be Geely," he said in a recent interview.

Associates of Mr. Li say he often tells them the challenge for Geely isn't to compete against Ford and GM, but against Alphabet Inc.'s Google unit and Apple Inc.

Daimler is one of the most advanced technology companies in the world, a household name with massive stores of automotive patents and know-how. It is on the front lines of the auto industry's efforts to defend itself against Silicon Valley, which is encroaching on auto-industry turf with the development of car-sharing, ride-hailing services and self-driving vehicles.

Gang Wei, co-CEO of China Euro Vehicle Technology AB, the research-and-development center in Gothenburg that is owned by Geely Holding, said Mr. Li "is a strategic person first, an entrepreneur second."

A Daimler spokesman said the company doesn't know what Mr. Li's longer-term goals are, or exactly why he invested in their company.

A closer association could be a boon for Daimler, too. The Stuttgart-based company already has links to China through a joint venture with BAIC Motor Group. The two agreed last year to make electric vehicles for the Chinese market.

The investment, though, could cause waves in Germany. The government there has become increasingly anxious about a wave of Chinese investments and takeovers of its companies. Last year, Berlin tightened scrutiny of foreign direct investment.


Yang Jie

in Beijing contributed to this article.

Write to William Boston at william.boston@wsj.com and Robert Wall at robert.wall@wsj.com


(END) Dow Jones Newswires

February 25, 2018 08:59 ET (13:59 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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