Chinese automobile manufacturer BYD has recently increased its foreign investment, according to domestic commercial inquiry platform Tianyancha. The new invested enterprise is named Denza Automobile Sales and Service Co., Ltd., with an investment ratio of 100%. Just the day before, Zhao Changjiang, Director of BYD Auto High-end Brand Preparation Office, issued the following announcement: “[BYD] received the business license of Denza Automobile Sales and Service company. The reconstruction of high-end services and experiences is about to begin!”
The released information shows that the new company was established on February 14, 2022. Its legal representative is He Zhiqi, and the registered capital is 50 million yuan ($7.9 million). The company’s business scope includes the sale of new cars, new energy vehicles and electrical accessories for new energy vehicles. The company is wholly controlled by BYD Auto Industry Co., Ltd.
Denza is a joint venture between BYD and the Mercedes-Benz Group, marking the long-term cooperation between the two parties in the Chinese market. In 2010, they signed an agreement on the establishment of Shenzhen BYD Daimler New Technology Co., Ltd., and launched the joint venture company of with a share ratio of 50:50. The firm then released a new model under the brand name “Denza,” which was the first Sino-foreign joint venture company focusing on new energy vehicles in China.
On December 24, 2021, BYD and Daimler AG jointly announced that they planned to increase their capital by 1 billion yuan into Denza. After the completion of this capital injection, both parties adjusted the future equity of Denza – BYD holds 90% and Daimler AG holds 10% of shares in the joint venture company. Relevant matters still need to be approved by regulatory authorities, which is planned to be completed in mid-2022.
Denza expects to launch three new models in the Chinese market in the next two years, including MPVs and SUVs. BYD said that it will devote more resources and core technologies to Denza and work with Daimler AG to promote its development, including product R&D, intelligent manufacturing, sales channels and customer services.
However, BYD’s investment income in Denza confirmed by the equity method was -232 million yuan in 2017, -475 million yuan in 2018 and -539 million yuan in 2019.
BYD explained that, with the growing maturity of the new energy vehicle market, other major automobile companies have successively launched products aiming at different vertical markets, which has greatly impacted the market share of Denza products. BYD also pointed out that Denza has been established only in recent years, so there is room for it to increase its brand awareness, plus the large investment in R&D in the initial stage. This explains the annual increase in losses.