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Daimler (DDAIF) to Increase Stake in China Joint Venture

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Per Bloomberg, Daimler AG (DDAIF - Free Report) has expressed interest in increasing its stake in a joint venture (JV) with its Beijing, China-based partner, BAIC Motor Corp. The German luxury carmaker Daimler intends to exert greater control in the attractive China market by raising its stake from 49% to 65%. However, no final agreement has been signed between these partners yet.

The trade spat between the United States and China has prompted automakers to expand their footprint in the world’s largest car market. Further, the easing of the rules on an automotive joint venture with local partners has simplified prospects of entry to China. In fact, a resilient business in China is crucial for Daimler to maintain its financial strength and counter the challenges posed by a slow global auto market.

Importantly, in 2017, Daimler produced 430,000 vehicles through its JV with BAIC. This accounts for the automaker’s 70% sales in the country. Daimler also manufactures electric cars under the Denza brand through a JV with BYD Co.

From 2022, global auto manufacturers will be allowed to hold majority stakes in passenger vehicle JVs. The requirement to collaborate with a partner has already been lifted for electric car businesses.

Over the past year, shares of Daimler have underperformed the industry it belongs to. Over this time frame, shares of the company have plunged 31.1%, whereas the industry decreased 19.4%.

Currently, Daimler carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the auto space are Allison Transmission Holdings, Inc. (ALSN - Free Report) , Fox Factory Holding Corp. (FOXF - Free Report) and America’s Car-Mart, Inc. (CRMT - Free Report) . While Allison Transmission and Fox Factory sport a Zacks Rank #1 (Strong Buy), America’s Car-Mart carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Allison Transmission has an expected long-term growth rate of 10%. Over the past six months, shares of the company have increased 5.9%.

Fox Factory has an expected long-term growth rate of 17.9%. Over the past six months, shares of the company have risen 49.2%.

America’s Car-Mart has an expected long-term growth rate of 19.5%. Over the past six months, shares of the company have grown 11.4 %.

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