Advertisement
Canada markets closed
  • S&P/TSX

    22,167.03
    +59.95 (+0.27%)
     
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • DOW

    39,807.37
    +47.29 (+0.12%)
     
  • CAD/USD

    0.7380
    -0.0006 (-0.08%)
     
  • CRUDE OIL

    83.11
    -0.06 (-0.07%)
     
  • Bitcoin CAD

    94,390.83
    -1,329.77 (-1.39%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • GOLD FUTURES

    2,254.80
    +16.40 (+0.73%)
     
  • RUSSELL 2000

    2,124.55
    +10.20 (+0.48%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • NASDAQ

    16,379.46
    -20.06 (-0.12%)
     
  • VOLATILITY

    13.01
    0.00 (0.00%)
     
  • FTSE

    7,952.62
    +20.64 (+0.26%)
     
  • NIKKEI 225

    40,369.44
    +201.37 (+0.50%)
     
  • CAD/EUR

    0.6842
    -0.0001 (-0.01%)
     

Daimler to Work With Geely on Ride-Hailing Service in China

(Bloomberg) -- Chinese billionaire Li Shufu may have found the glue to start binding together the automobile assets he’s assembled across the globe -- by creating an entirely new business altogether.

Li’s Zhejiang Geely Holding Group Co. is in talks with Daimler AG -- in which Li took an almost 10 percent stake earlier this year -- to set up ride-hailing and car-sharing services in China, according to people familiar with the matter. Under discussion is a 50-50 venture that would take on market leader Didi Chuxing, said one of the people, who asked not to be identified because the deliberations are confidential.

The venture would target an expanding market for the new types of transport services that has been dominated so far by tech companies like Didi and Uber Technologies Inc. Automakers are scrambling to establish themselves in new technologies, as car-sharing and autonomous driving threaten to upend the traditional model of vehicle ownership.

“Li acquiring the stake in Daimler does have a very clear strategic rationale and industry logic,” said Bill Russo, chief executive officer of Shanghai-based advisory firm Automobility Ltd. “The JV, as the first step of the collaboration, is good evidence of that.”

ADVERTISEMENT

In the past eight years, Geely has amassed a stable of auto brands, including Volvo Cars, British sports-car maker Lotus, London Black Cabs -- and the largest stake in Daimler, the maker of Mercedes-Benz.

Daimler and rivals from Volkswagen AG to Toyota Motor Corp. are seeking a foothold in the transport services that are changing the way consumers use vehicles. China, the world’s biggest auto market, may end its near-three-decade growth partly because consumers are moving from owning to sharing, according to Russo and other analysts.

Daimler has had more success in mobility than most, gaining traction with ride-pooling service ViaVan, ride-sharing app MyTaxi and car-sharing platform Car2Go, which is being merged with BMW AG’s DriveNow.

Toyota, the world’s most valuable carmaker, is also moving fast. The company has snapped up stakes in Uber and Southeast Asian ride-hailing provider Grab, and has said it’s in talks to work with Didi in China. Toyota is also expanding its car-sharing services in Europe and last week teamed up with SoftBank Group Corp. for a venture that will develop ride-hailing and self-driving car technologies.

The discussions between Daimler and Geely haven’t been finalized, according to the people. Spokesmen for Stuttgart-based Daimler and Geely, based in Hangzhou, China, declined to comment.

Shares of Geely advanced 1.6 percent at 9:20 a.m. in Hong Kong, giving the company a market capitalization of $HK122 billion ($15.6 billion). Daimler declined 0.3 percent in Frankfurt on Tuesday, valuing the carmaker at 58.2 billion euros ($67 billion).

Strength in Numbers

A venture would deepen a relationship that started with the Li acquiring almost 10 percent of Daimler earlier this year. Li has said that the investment forms the basis for partnerships in an era where traditional manufacturers can no longer go it alone against new entrants with fresh technology.

The fresh competition comes at a time when Chinese ride-hailing company Didi is facing unprecedented regulatory scrutiny in China as well cash-draining initiatives to fend off hard-charging rivals like Meituan Dianping. Daimler is considering using cars from its electric-vehicle brand Denza, its joint venture with Warren Buffett-backed BYD Co., the people said.

Geely is a more commercially compatible partner for Daimler than BYD because it has a better understanding of the nuances involved in shared services and “has a good background for doing business with multinational companies,” Russo said. Together, the two can offer the widest range of services, “from entry level to premium.”

In China, Daimler started a pilot car-sharing offer in the central city of Chongqing in 2015, extending it to some 40 Chinese cities. Last year, Daimler said it was seeking a partner to help make the venture profitable as it struggled from comparatively cheap taxi and ride-hailing options.

At the Paris auto show last week, Daimler Chief Executive Officer Dieter Zetsche described the talks with Geely over possible projects as “very constructive,” saying that they look “very promising so far.” He declined to specify which areas of collaboration have been discussed so far.

Geely has been steadily increasing its sales volume in China, and it now trails only Volkswagen and General Motors Co. in its home market. The company already has a ride-hailing app called Caocao that offers service in 24 cities in China using 23,000 electric vehicles, according to its website.

(Updates with Toyota’s plans in eighth paragraph.)

--With assistance from Christoph Rauwald and Oliver Sachgau.

To contact Bloomberg News staff for this story: Yan Zhang in Beijing at yzhang1044@bloomberg.net;Haze Fan in Beijing at hfan40@bloomberg.net

To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net, Ville Heiskanen, Anthony Palazzo

For more articles like this, please visit us at bloomberg.com

©2018 Bloomberg L.P.