The Star in Foreign Hands

I. The Third Case

We took Volkswagen at its self-hollowing from within, and BMW at the closed loop of socialised research, substance migrated to China, and privatised profit. Mercedes-Benz is the third case — and it demands its own incision, because the wound sits elsewhere.

The situation is grim enough. Net profit for 2025 collapsed by about 49 percent, from 10.4 to 5.3 billion euros; operating profit fell 57 percent to 5.82 billion, revenue 9 percent to 132.2 billion. In China, still nearly a third of all cars sold, sales fell 19 percent in 2025 and a further 27 percent in the first quarter of 2026.

But the collapse of the China business is the wound Mercedes shares with everyone. What is particular to Mercedes is something else. The company did not merely rely on the Chinese market — it let China inside, twice over: once into the share register, once into the engine bay. The star, this essay argues, is no longer in its own hands.

II. The Competitor on the Share Register

At BMW, ownership concentrates upward into a German family. At Mercedes it lies elsewhere — with the competitor itself. The largest single shareholder, with 9.98 percent of voting rights, is the Chinese BAIC Group, controlled by the Beijing city government and at the same time Mercedes's long-standing joint-venture partner in China. The second largest is the Chinese industrialist Li Shufu, who holds 9.69 percent through his Tenaciou3 Prospect Investment holding — founder of Geely, hence competitor and cooperation partner in one. Together the two Chinese stakes amount to 19.67 percent. The third large block, the Kuwait sovereign fund, has held a further 6.8 percent since 1974.

The inventor of the automobile, the German national symbol, belongs one-fifth to two Chinese owners — the larger of them a state-controlled competitor that sits at the very table where strategy is decided. CEO Ola Källenius once welcomed the entry diplomatically: the company was glad, he said, of the engagement of all long-term shareholders.

This ownership, once welcomed, now turns into a liability. In early February 2026 a „Motor Vehicle Modernization Act of 2026" was introduced in the US House of Representatives, aimed against the influence of „foreign adversary states" on the American auto industry. Manufacturers controlled directly or indirectly by such a state would no longer be permitted to produce, import or sell in the United States. The relevant threshold is 15 percent — and Mercedes's Chinese stakes, at 19.67 percent, lie above it. The dependency Stuttgart invited into its own house could push the company out of its second-most-important market.

III. The Blocking Minority — and the Invisible

Add the three largest blocks together — BAIC, Li Shufu and Kuwait — and the figure is 26.47 percent. That crosses the decisive line: the 25 percent required for a blocking minority. Resolutions that need a three-quarters majority — changes to the articles, capital measures, mergers, relocation of the seat, dissolution — could be blocked with more than a quarter of the votes. The three largest shareholders together could prevent any fundamental decision of the company.

Honesty is owed here, and we hold to it. A blocking minority works only if the three vote together. BAIC, Li Shufu and the Kuwaiti fund are legally independent actors with differing interests; coordinated action would be disclosable and delicate under takeover law, and there is no evidence of it. Arithmetically they hold the blocking minority; as a political fact it is latent, not activated. Yet two of the three are Chinese and pursue strategic, not merely financial, interests — 19.67 percent between them. And because attendance at shareholder meetings is regularly well below a hundred percent, each block weighs more in the room than on paper; the effective blocking threshold is reached with even less.

But that is only the visible part. The reported figures are a floor, not a ceiling. Voting stakes must be disclosed only above three percent, then at fixed thresholds; everything below remains invisible, and one can build up to the next threshold unseen. Through financial instruments — swaps, options — economic exposure can be assembled that does not trigger a voting-rights disclosure for a long time. And the so-called institutional free float is no transparent block but a curtain of custodian banks and nominee structures, behind which the beneficial owner is often not identifiable from outside.

That this is no mere theory at Mercedes, BAIC has demonstrated. The build-up of its stake was not announced: the figure officially communicated was around five percent, while in fact the state-linked group had quietly worked its way up to 9.98 percent from 2019 onward before it became public. One who has accumulated quietly once may be trusted to do so again.

It does not follow that the free float is in truth Chinese-dominated — we do not know that, and we do not claim it. What follows is sharper: the true degree of foreign entanglement simply cannot be determined from outside, and a state wishing to deepen its grip would not have to announce it. The scandal is not a hidden majority but that, at the inventor of the automobile, a company of strategic relevance, such a thing is possible at all and no one can shed light on it. The opacity itself is the finding.

IV. The Competitor in the Engine Bay

The second door through which China reached the interior is the engine itself. It opened through a failed bet. At the October 2020 investor update, Daimler announced it would cut spending on combustion-engine development by 70 percent by 2030; it would develop no new combustion engines, it said, and those it had should be the last from its own house. The new compact platform, MMA, was conceived as a pure electric car. This was the strategy of „electric only from 2030".

Then the transition stalled, and the bet had to be withdrawn. Mercedes needed a volume four-cylinder again — and did not build it in Germany. The new engine, designated M252, is manufactured exclusively in China, at Aurobay, the former Geely engine works, today a combine of Geely and Volvo, in the plants at Yiwu and Beijing; from there it is shipped to the Mercedes sites at Rastatt and Kecskemét. Mercedes stresses that the drivetrain was developed by Mercedes engineers to Mercedes standards; part of the trade press describes it as a joint development with Aurobay. However the exact depth of development runs — the inventor of the automobile no longer builds its standard combustion engine itself, nor in Germany. After almost a hundred and forty years, that is a caesura.

And the enabler is no stranger but the company's own shareholder. Aurobay belongs to the realm of Geely — that same Li Shufu who holds 9.7 percent of Mercedes. The competitor from the share register has advanced, through the engine cooperation, into the machine room. The mistaken forecast of the combustion engine's end opened the door; the competitor-owner walked through it. By now the circle to the first movement closes: an engine built in China is itself politically delicate in markets like the United States — the same vice that already grips the ownership.

V. The Luxury Bet

That leaves the third binding, the strategic one. Källenius drove Mercedes steadily upmarket — retreat from the entry segments, everything on the top end and the margin. This luxury strategy rested on a single pillar: the Chinese appetite for status symbols. That very pillar is giving way. The adjusted return on sales of Mercedes-Benz Cars fell from 8.1 to 5.0 percent; the company is now correcting course, cautiously in language but clearly in substance.

The point of the luxury bet is that it cleared away the volume base just as the top end gave way. Whoever retreats from breadth to wager on the peak stands without a floor when the peak buckles. This wound Mercedes shares with the others — it merely cuts deeper here, because less volume remains to fall back on, and because the very volume engine one would need now comes from China.

VI. The Star in Foreign Hands

Now the figure can be traced in full. A German emblem whose two largest owners are Chinese. Whose three largest could together block any fundamental decision. Whose true ownership depth no one can determine from outside. Whose standard combustion engine is built in China, by the works of its own shareholder. And whose strategy wagered everything on the Chinese upper class.

No one of these movements is, on its own, the verdict. Together, though, they describe a company that has handed away command of its own fate step by step — outward, and out of Germany, and most of it by its own decision. The inventor of the automobile did not lose the star. It passed it on piece by piece and called each piece a good deal.

We have called the basic figure of this series, elsewhere, the husbanding of the many for the good of the few. Mercedes adds a turn of its own. The others hollowed themselves out. Mercedes went a step further: it handed the guest the key.