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If you’re sitting on a lot of cash these days you’re definitely in a comfortable and very powerful position. And as cash-rich investors don’t want to see their money’s purchase power eroded over time, they’re making huge investments in underpriced companies.

The emirate of Abu Dhabi holds more than 8 percent of the world’s oil reserves and is diversifying its economy.  Until recently, neighboring Dubai had been more glitzy and successful attracting new businesses and millions of visitors. But with the burst of the real estate bubble which coincided with the outbreak of the financial crisis, debt-laden Dubai is struggling with overcapacities in every sector and a rapidly cooling economy.

Abu Dhabi is - unlike Dubai - still heavily dependent on oil exports. But since Abu Dhabi’s ruling family is also aware that oil reserves won’t last forever, state-controlled investment firms are making strategic investments in overseas companies.

On Sunday, Daimler - the parent company of Mercedes-Benz, producing luxury cars as well as trucks - said that Abu Dhabi’s Aabar Investments PJSC will buy a 9.1% stake of the German car maker. Abu Dhabi is set to displace Kuwait as Daimler’s largest stakeholder. Aabar considers the deal to be a long-term investment. The company and the emirate are going to collaborate on the development of electric car technology. While at first sight it looks like an oil-exporting country and an investment firm that is invested in numerous companies in the energy sector (e.g. in the Austrian oil company OMV) could benefit from a car maker producing gas-guzzlers, Abu Dhabi has already shown a huge interest in alternative energies:

Masdar City will become a unique state-of-the-art green city on the outskirts of Abu Dhabi. It will be free of carbon emissions, free of waste and free of conventional cars. Solar panels, photovoltaic and windpower will provide the energy needed for its future 50,000 inhabitants, its electric light-rail transportation system and desalination facilities. All waste will be recycled and waste water will be purified to be used to grow plants for biofuels.Short distances will make cycling and walking the quickest ways to get around next to the automated electric personal rapid transit system.

The $22 billion project is reinforcing Abu Dhabi’s goal of becoming the “City of the Future”. With the start of the Masdar initiative, Abu Dhabi finally stopped looking jealously at Dubai’s artificial palm-shaped islands and world record skyscrapers.

On the one hand, Abu Dhabi’s investment of €1.95 billion ($2.7 billion) helps Daimler to navigate through the automobile crisis which forced the German car maker to post a $1.95 billion loss in the fourth quarter of 2008. On the other hand, Mercedes-Benz is an iconic brand and Daimler can provide zero emission electric vehicles for the emirate’s eco-projects. Furthermore, Daimler agreed to build a training center in Abu Dhabi where the emirate’s youth should be trained to work in the auto industry.

http://www.autoblog.com/2009/03/23/report-daimler-sells-9-1-stake-to-abu-dhabi-firm-for-2-7-bill/

http://www.bloomberg.com/apps/news?pid=20601087&sid=aUaoZ24JQOxg&refer=home

for further reading:

being confronted with the reality of the global crisis, Dubai delays the “one kilometer tower” (from my old blog “What Matters”)

This entry was posted on Monday, March 23rd, 2009 at 3:46 PM and is filed under Electric Cars & Auto Industry. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.