Daimler is said to be about to sell half of its subsidiary brand Smart to its Chinese major shareholder Geely. The official announcement of the takeover of 50 per cent of the Smart shares is apparently going to take place before the Shanghai Auto Show in April.
The Financial Times reports this with reference to three people familiar with the matter. This step comes as no surprise, although is came fast, as we suggested just days ago that Daimler would have to come up with a plan for the future of its small car brand this year – and that a partner in China could play a decisive role.
One thing is clear: Smart has great potential in view of its uncompromising electrification strategy, especially in China. There, compact electric models – on which the company relies without exception – are in great demand. It must be added, however, that demand in China could, of course, weaken in the near future as a result of the sharp reduction in government incentives to buy.
But back to Smart: Just a few days ago, the future of the brand was completely uncertain. While Daimler CEO Dieter Zetsche is regarded as their advocate, his designated successor Ola Källenius should have no special sympathies for Smart. Observers, therefore, considered it quite possible that the subsidiary could fall victim to the savings pressure at Daimler. After two decades of permanent losses, the brand is still not in the black and with 130,000 cars sold per year it looks quite old compared to Mercedes-Benz (2.25 million cars).
Now Geely could distinguish itself, by coming to Smart’s rescue. A month ago it was announced that Daimler could sound out a cooperation with the Chinese manufacturer for the Smart successor models. There had even been reports that there were already concrete talks on technical cooperation. Until now, Smart had shared a large part of the technology with Renault, but the cooperation is on hold.
The ties between Geely and Daimler are already quite close today: First and foremost, of course, in view of the fact that Geely founder Li Shufu rose to become Daimler’s shareholder in 2018 with just under 10 per cent. In October, the two companies then announced that they would install a ride-hailing service in China and set up a 50:50 joint venture with headquarters in Hangzhou for this purpose. The fleet will initially include the Mercedes-Benz S-Class, E-Class, V-Class and Maybach models. Premium electric vehicles from the Geely Group could complement the fleet.
Geely itself has fixed its corporate plans in mid-2018 in a new energy strategy called “Geely Intelligent Power”. Among other things, the paper contains the announcement that no fewer than 30 new electric and hybrid models will be launched on the market within two years, including several purely electric models with a range of more than 500 km.
To what extent the partial takeover of Smart would also meet with political approval is questionable. It is well known that the German government has concerns about the growing influence of Chinese companies on their local economy. At the end of 2018, it passed a law that lays down stricter rules for the acquisition of shares in German companies in sensitive areas. This could certainly make the deal more difficult, should both companies decide to pursue it officially.
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