Fiat Chrysler was very nearly purchased by a Chinese automotive holding company.
Zhejiang Geely Holding Group Co. (Geely), owned by Li Shufu, recently announced a $9 billion stake in Daimler Automotive Group, making Geely the largest single holder of Daimler stock. The deal is seen to vastly expand Geely’s reach in Europe and provide them access to a significant portion of Mercedes’ automotive prowess.
Yet, before deciding to invest in the German automotive juggernaut, Shufu looked further westward to expand his growing empire.
In the middle of last year, Shufu approached Fiat Chrysler in informal acquisition talks. According to sources with Bloomberg, "Li opted not to make a formal offer as the two parties had different views on future valuations of Fiat Chrysler after the company’s five-year growth plan through 2018, they said."
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It was then that Geely began to look at Daimler AG as a possible point of economic expansion, which culminated in the $9 billion stake announcement last week.
Geely is expanding quite a bit into Europe with large or majority stakes in Daimler AG, Volvo, Lotus, and more. That gives Geely a strong automotive lineup that spans heavy trucks, luxury vehicles, and even sports cars.
But Geely’s primary market remains in China. In 2011, Geely sold 15,596,100 vehicles in the country of several billion, and although that sounds like a lot of cars (Ford sold 6.6 million vehicles worldwide in 2017) that still only amounts to less than 3 percent of the total Chinese market.
In case this hasn’t been made clear, China’s automotive market is huge. It’s already surpassed the entire US market, and will likely surpass all of Europe soon.
As for Fiat, Chief Executive Officer Sergio Marchionne was previously all for mergers, saying that it was inefficient for the industry as a whole to invent the same technologies separately. But after his courtship of a merger with GM was rebuked in 2015, he changed his tune. Now, Fiat Chrysler is confident it can survive all on its own and is currently focusing on bringing down its outstanding debt.