Portfolio changes and strategic partnerships

By means of targeted investments and future-oriented partnerships, we strengthened our core business and utilized additional growth potential in 2014. At the same time, we focused on the continuous further development of our existing business portfolio.

Daimler sells its interest in Rolls-Royce Power Systems Holding. In March 2014, the Board of Management and the Supervisory Board of Daimler AG decided to exercise an option to sell the Company’s interest in Rolls-Royce Power Systems Holding (RRPSH) to the other shareholder. Rolls-Royce’s acquisition of Daimler’s shares will allow it to strengthen the company by integrating additional Rolls-Royce activities and technologies into it. On the basis of long-term supply agreements, Daimler will remain a key supplier of heavy-duty and medium-duty diesel engines to Rolls-Royce Power Systems. Daimler also plans to further expand its business activities with engines and drive systems for professional non-bus and non-truck (off-highway) applications. The transaction generated proceeds of €2.4 billion for Daimler in the third quarter. Daimler will use these funds to strengthen the Group’s core business.

Strategic partnership in China strengthened. Also in March 2014, Daimler AG and its Chinese partner Beijing Automotive Industry Corporation (BAIC) signed an agreement to increase production capacities at Beijing Benz Automotive Co., Ltd. (BBAC). This move will lead to a further expansion of our activities in China and will also strengthen our strategic partnership with BAIC. Around €4 billion is currently being invested at BBAC, with €1 billion earmarked for the expansion of local car and engine production capacity alone through 2015. The existing annual capacity at BBAC for production of the C-Class, E-Class and GLK will be more than doubled to over 200,000 units by the end of 2015. This figure also includes the GLA compact SUV, which BBAC will begin manufacturing in 2015.

Daimler had already deepened its strategic partnership with BAIC in November 2013 with the acquisition of a 12% equity interest in BAIC Motor, the car division of the BAIC Group. BAIC Motor has been listed on the Hong Kong Stock Exchange since December 2014.

moovel GmbH consolidates mobility services. In April 2014, the umbrella company for the car2go, car2go black and moovel mobility services was renamed as moovel GmbH. The moovel mobility app offers users a central access portal for numerous mobility services. The app’s features were expanded in 2014 and moovel also began offering the app in additional cities both in Germany and abroad during the year under review. moovel has also teamed up with new partners, which gives customers even more choices for getting where they need to go. The renaming underscores the importance of the mobility platform, as well as its strong customer focus.

In September 2014, moovel completely acquired Intelligent Apps GmbH, which offers the mytaxi service, and also took over the US mobility services provider RideScout LLC. mytaxi is the world’s first app that directly links passengers and taxi drivers. moovel GmbH has had an interest in mytaxi since the beginning of 2012. RideScout is the well known provider of the leading mobility app in North America. RideScout offers an app-based mobility platform that shows customers in nearly 70 cities in North America the best way to get to their destinations. With the acquisition of RideScout, moovel is strengthening its presence in the international mobility services market and accelerating its global development.

Daimler takes over battery manufacturing activities. In April 2014, Daimler AG and Evonik Industries AG reorganized their electric mobility activities in Kamenz and Kirchheim unter Teck. Daimler has now acquired the shares of Li-Tec Battery GmbH previously held by Evonik (50.1%), as well as Evonik’s stake in Deutsche ACCUmotive GmbH & Co. KG (10%). This makes it the sole shareholder in both companies. With the increasing concentration of battery-cell production at several large specialist companies, and as a result of extreme price competition between major manufacturers, battery cells have now become an inexpensive mass product. Given this situation, it no longer makes any economic sense for us to manufacture battery cells for specific use in automotive applications. We have therefore decided to discontinue production of cells at Li-Tec at the end of 2015. Nevertheless, the development of complete battery systems still requires the type of extremely specific expertise that we have accumulated over the past few years and will to continue to utilize in the future. As a result, Deutsche ACCUmotive will significantly expand its lithium-ion battery production capacity in Kamenz. We will invest approximately €100 million in this expansion over the next few years.

Additional capacities for transmission production. As part of our efforts to accommodate the increasing demand for automatic transmissions, we laid the cornerstone in April 2014 for a new assembly plant to be operated by our Star Transmission subsidiary in Romania. This additional capacity in Sebes will supplement existing transmission activities at the Untertürkheim plant, where the new nine-speed 9G-TRONIC automatic transmission from Mercedes-Benz will go into production in 2016.

Cooperation with Renault-Nissan expanded. Cooperation between Daimler and Renault-Nissan remains very successful. The number of joint projects has increased fourfold, from three to 12, since the partnership commenced in 2010.

An important milestone in 2014 was the market launch of the first vehicles fully co-developed from scratch: the new Renault Twingo and the new smart fortwo and forfour models. The smart fortwo is built at the smart plant in Hambach, France, while the Renault Twingo and smart forfour are manufactured at the Renault plant in Novo Mesto, Slovenia. The Renault Twingo was launched in Europe in September; the smart fortwo and smart forfour followed in November.

In June, joint production of a two-liter, turbocharged four-cylinder gasoline engine began at a new plant in Tennessee in the United States. The engines, which are built at the Infiniti Decherd Powertrain facility, will initially be used in the Infiniti Q50 sports sedan for the European market and in the Mercedes-Benz C-Class. When fully ramped up, the new plant will have a production capacity of 250,000 units each year.

Also in June 2014, Renault-Nissan and Daimler AG announced an agreement covering the development of premium compact cars and the joint production of vehicles in Mexico. A new 50:50 joint venture is responsible for building and operating a new manufacturing facility in Aguascalientes, Mexico. The new plant is being constructed at a site in the direct vicinity of an existing Nissan facility. After the production launch, the new plant will be ramped up to an annual capacity of 300,000 units. Production is scheduled to begin with Infiniti models in 2017. The plant will start manufacturing Mercedes-Benz brand vehicles in 2018.

In the van segment, Daimler’s Mitsubishi Fuso Truck and Bus Corporation (MFTBC) and Nissan Motor Co. Ltd. signed a contract in October 2014 covering the supply of finished commercial vans for export. Under the terms of the contract, Nissan is supplying its “NV350 Urvan” (GVW: 3.5 metric tons) to Mitsubishi Fuso, which has been selling the model as the “Canter Van” in the Middle East since the end of 2014.

Cooperation with Tesla restructured. Daimler reorganized its cooperation with Tesla Motors Inc. in October. Within the framework of this restructuring, we terminated the share-price hedge initiated at the end of 2013 and sold our stake of approximately 4% in Tesla. The partnership and cooperation with Tesla do not require us to have a financial interest in the company. The sale of our Tesla shares generated proceeds of approximately €0.6 billion, which will be used to strengthen business operations. Cooperation with Tesla will nevertheless remain an important part of Daimler’s activities in the field of electric mobility in the future.

Interest in MV Agusta. In October 2014, Mercedes-AMG and the motorcycle manufacturer MV Agusta signed a cooperation agreement that will create a long-term partnership. The two brands, which have long traditions and histories, will cooperate in the area of sales and marketing. After the agreement was approved by the responsible antitrust authorities, Mercedes-AMG GmbH acquired a 25% interest in MV Agusta S.p.A. in November 2014.