Mercedes-Benz Strikes $95.5 Million Joint Venture Deal in China

09/18/96

Reuters reported that the car making unit of Germany's Daimler-Benz AG and China's biggest bus maker closed three years of negotiations by agreeing to set up a $95.5 million joint venture to make buses and chassis.

Helmut Werner, chief executive officer of Mercedes-Benz AG and Ju Baocai, chairman of Yangzhou Motor Coach Manufacturer General, agreed to set up Yaxing-Benz Ltd in Yangzhou in the eastern province of Jiangsu. Mercedes-Benz and Yangzhou Motor will each hold a 50 percent stake in the venture, which will have the capacity to produce 7,000 tourist buses and 12,000 chasis annually. The first bus will roll off the Yaxing-Benz line in early 1997.

Werner told a news conference that the venture gives Mercedes-Benz a foothold in the world's biggest bus market: "This joint project opens a highly promising perspective for us in the largest and most attractive bus and coach markets in the world."

A Chinese source familiar with the deal said the Yaxing-Benz vehicles will be the first domestically manufactured buses to meet tough rules introduced by the Communications Ministry, and will be able to operated along motorways where only imported buses can currently go.

The agreement allows for 30 years of cooperation between the two firms. Mercedes-Benz had pledged to transfer technology to the venture, which hopes to break even in three years.

The new venture's exports have been forecast to account for 20 percent of its annual sales volume within 10 years.

Werner said Mercedes-Benz has also been trying to negotiate a joint deal to produce multi-purpose vehicles with Sanxing Motor in the southern province of Guangdong and Hainan Automotive Factory in the southern island province of Hainan. Werner indicated that Mercedes has been negotiating the MPV deal for 18 months, but the two Chinese carmakers have found differences that needed to be ironed out before a joint venture with Mercedes-Benz will work. He would not elaborate on the problems.

Paul Dever -- The Auto Channel