Daimler and Beijing Automotive Industry Corporation (BAIC) have inked a $2.87 billion agreement to build four models in China, while also expanding engine production and building a research and development center.
The idea is that Mercedes-Benz will be able to use the investments to expand its line of luxury compact cars, since the company believes that by 2020, one in five upscale compact cars will be sold in China.
The engine plant will produce four-cylinder gasoline engines, starting at 100,000 units a year with plans to expand to 250,000 annual units, while the R&D center will be the home vehicle testing and adaptation. Suppliers will also work with Daimler on research and development at the center.
Daimler clearly believes in the strength of the Chinese market, as this move shows.