Daimler expands BAIC partnership

GERMAN automotive giant, Daimler is strengthening ties with Chinese partner Beijing Automotive Industries Co (BAIC), signing a €4 billion ($AU5.8bn) deal to add the Mercedes GLA-Class to the range of vehicles produced at its Beijing factory.

Daimler's Chinese subsidiary, Beijing Benz Automotive Co (BBAC) already manufactures the Mercedes C-Class mid-sized sedan, GLK SUV and a long wheelbase E-Class, but the addition of GLA-Class will more than double production.

The first Chinese-built GLA crossovers will start rolling off production lines early next year and will be built at the company's new compact vehicle plant, which has been under construction since 2012.

The new line was commissioned in July this year and has been designed to handle up to a quarter of a million vehicles per year, with start-up coinciding with the opening of a new research and development centre at the same site.

Increased production in the Asia Pacific region has been necessary to cope with strong demand for Mercedes vehicles, with sales of the three-pointed star up more than 30 per cent year on year.

The GLA-Class launched last year and is currently only produced at the Rastatt factory in Germany, and the new Chinese facility will also continue to produce four and six-cylinder Mercedes engines as well as the new GLA addition.

German rival manufacturer Volkswagen has also recently announced further commitments to Chinese manufacturing with a First Automotive Works (FAW) partnership deal extended until 2041.

The joint venture will see significant expansion in research and development, ahead of upcoming moves into “new business areas” including alternative drivetrain technology, and investment of €100 million ($A145.7m) in a proving ground for testing new VW models.

Daimler's partnership with BAIC dates back to 2003 when the German parent company bought a 12 per cent stake in the Chinese giant and started producing Foton medium and heavy-duty trucks as well as Mercedes passenger vehicles.

Daimler chairman Dieter Zetsche said the agreement with BAIC is a mark of the German company's commitment to the future of Chinese manufacturing and sales.

“This shows again that we are both committed to our long-term partnership with BAIC and confident in our future in the key market of China,” he said.

“This strategic investment in the localisation of compact cars will give us better access to the huge growth potential that this segment offers in the mid-term, and so pave the way for Mercedes-Benz’s sustainable growth.”