Daimler To Invest $2.9 Billion With Chinese Partner BAIC

Just the Facts:

• Daimler aims to expand its presence in the premium compact segment in China.
• The Beijing Benz Automotive joint venture will start building the GLK compact crossover later this year.
• The investment also covers construction of an engine plant and a new R&D center.

BERLIN — Daimler AG and Chinese partner Beijing Automotive Industry Corporation (BAIC) said they plan to jointly invest $2.9 billion to expand their activities in China, notably production of premium compact cars, including the Mercedes-Benz GLK crossover.

The investment in the Beijing Benz Automotive joint venture also will fund construction of an engine plant and a new R&D center.

At a signing ceremony in Berlin attended by German Chancellor Angela Merkel and Chinese Prime Minister Wen Jiabao, Daimler CEO Dieter Zetsche said: "With this framework agreement, we are laying the essential strategic foundations for our long-term and significant participation in the growth of the key market China.... We are resolutely switching to attack mode with the local production of our new compacts."

The strategic framework agreement with BAIC calls for the partners to begin local assembly of the GLK later this year, followed by three models of the next-generation A- and B-Class compacts beginning in 2013.

The partners also plan to expand production capacity for the C-Class and long-wheelbase E-Class, which is currently at 80,000 units a year.

The new engine plant, which will build four-cylinder engines for Mercedes-Benz cars and vans in China, will have an annual capacity of 250,000 units.

In addition to its alliance with BAIC, Daimler also maintains partnerships in China with Fujian Automotive, Foton Motor and BYD Auto.

Inside Line says: Daimler continues to build a sturdy foundation for future growth in China.