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Feb 04, 2013 NEWSwire
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Geely Partners with Kandi, While BAIC Allies with Daimler

China-watcher Doug Young analyzes recent moves by two of China's largest carmakers.

Published: 04-Feb-2013

News bits from the automobile space indicate the long-awaited IPO by Beijing-based car maker BAIC Motor may finally be coming soon, while the struggling Geely (0175.HK) is chasing a couple of distracting new initiatives in the electric vehicle and overseas markets. Let's start with the BAIC news, as that looks the most interesting since it could provide investors with an interesting IPO opportunity later this year.

Media are reporting that BAIC's joint venture partner, German luxury automaker Daimler (Frankfurt: DAIGn), is paying 640 million euros for 12 per cent of BAIC. Daimler has said the deal makes it the first global brand to own a direct stake in a Chinese automaker, and added its investment was in preparation for a potential IPO by BAIC.

Under the deal, Daimler will gain 2 seats on BAIC's board. But perhaps most importantly, the deal will see BAIC boost its stake in its Daimler joint venture to 51 per cent, meaning BAIC can consolidate all of the joint venture's performance into its own results. That's an important accounting move, since BAIC, like many other major Chinese automakers, counts its foreign joint venture as one of its biggest assets with greatest growth potential.

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