Mercedes could forge closer ties with Volvo following Li Shufu's new investment (Photo: Daimler)

Geely founder and CEO Li Shufu has become Daimler's biggest shareholder, marking a reshuffle in the relationships between some of the world's biggest automakers.

Li already owns Geely as well as Swedish premium car maker Volvo Cars. Geely Holding also is the biggest shareholder in Swedish truck maker AB Volvo. And it has controlling stakes in British sports car maker Lotus and Malaysia's Proton brand.

With the acquisition of a 9.69 pc stake in Daimler, maker of Mercedes-Benz premium cars and trucks, the Chinese entrepreneur is set to further strengthen the Geely Group's aspirations of becoming a major global player.

The investment also could imply longer term greater cooperation potential between Mercedes and Volvo, which currently have few business ties. And it will give Geely access to Daimler's electric-vehicle technology expertise, which could help the Chinese brand in dealing with increasingly stringent local emissions rules.

Daimler said in a statement that Li will become "another long-term orientated shareholder." The company welcomed its new investor, who will have a bigger stake than the Kuwaiti investment fund that has a 6.8 pc holding in the German car group. Through a cross-shareholding arrangement, the Renault-Nissan alliance is the third-largest shareholder, with a 3.1 pc package of Daimler shares.

The global auto industry is dominated by a relatively small number of companies that often own or control several brands. Volkswagen Group includes 12 automotive brands, Renault and Nissan recently added Mitsubishi to their alliance and Fiat and Chrysler have merged to become one company, FiatChrysler. Also, in a European consolidation, France's PSA/Peugeot-Citroen last year acquired former General Motors unit Opel.

The continuing wave of mergers and acquisitions reflects the large economies of scale that can be achieved by joint purchasing, coordinated sales and marketing, and combined management of key business and operational areas.

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