His interest in Germany is the latest in a string of acquisitions by wealthy Chinese firms and individuals, including conglomerate HNA which owns an 8.8% stake in the country's biggest lender Deutsche Bank.
Kuwait's sovereign wealth fund, which has been an investor in Daimler for decades, was the largest stakeholder in the automaker as of the end of December with a 6.8 per cent holding.
In November, Geely asked Daimler to issue new shares so it could buy a stake, but the German company turned down the offer saying it did not want to dilute existing shareholders, sources at the time told Reuters.
"Geely will help Daimler take the lead in electric vehicles and online technological services", said Li Shufu, chairman of Geely.
The automotive industry is facing great opportunities for innovation, and Geely should cooperate with its peers to develop advanced automobile technologies instead of fighting by itself, 55-year-old Li said in a statement released on Saturday.
Daimler said: "We welcome that the entrepreneur Li Shufu will become a long-term oriented shareholder".
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The biggest shareholder in Germany's Daimler AG, Chinese carmaking giant Geely, has promised a long-term investment in the luxury vehicle firm after acquiring almost 10% of its shares.
As Geely has made an unprecedented foray into Europe, Daimler too is undergoing significant change.
In early February, Geely began courting Germany's automotive establishment in a carefully timed public relations campaign.
Li Shufu said,"The competitors that technologically challenge the global vehicle industry in the 21st century are not part of the automotive industry today".
The Chinese group bought Volvo Cars from Ford in 2010, and has since transformed the fortunes of the Swedish carmaker.
"We are in competition with one another, but should cooperate in areas where it makes sense", Forster told the audience.