Mercedes, Made in China

After more than a year of negotiations with its local partner, the Beijing Automotive Industry Holding Co. (BAIC), DaimlerChrysler signed a €1 billion ($1.1 billion) framework agreement in Beijing on Monday to produce Mercedes sedans and trucks in China.

"The cooperation agreement with BAIC marks a very important step for us indeed," Chairman Jürgen Schrempp said in Beijing. Schrempp said DaimlerChrysler sees China as the "most important market" to develop.

The joint venture will involve restructuring DaimlerChrysler's Beijing Jeep Corporation, building a new plant and upgrading new facilities to produce C- and E-class sedans and trucks, and, in a second phase high performance motors and other components as well. The manager of Daimler's China unit, Roman Fischer, said the firm would produce 25,000 vehicles by 2012, depending on market developments.

But the deal won't be finalized until it has been approved by the Chinese government. DaimlerChrysler spokesman Hartmut Schick suggested that it wouldn't take very long, and said the company is expecting the first Chinese-made Mercedes to roll off the assembly line as soon as 2005.

20 years on the Chinese market

So far, Daimler has only imported cars to China, although it has already been a presence on the Chinese market for 20 years. Only its Beijing Jeep has been made in China, and it hasn't been in great demand. The firm expects to sell 10,000 vehicles in China this year, 2,000 more than last year.

China is not only the world's fourth-largest car market after the United States, Japan and Germany, but it's also the world's fastest-growing one. Nearly 1.13 million vehicles were sold there last year, 56 percent more than in 2001.

Volkswagen, General Motors, Toyota and Honda are all major players on the Chinese market. DaimlerChrysler's greatest competitor in China, BMW, signed a joint venture worth €450 million with Brilliance China Automotive in March and plans to start producing cars soon.

It was just a matter of time until DaimlerChrysler expanded operations in China. "We have been pressing ahead with our China strategy for a long time," press spokesman Schick said. "The negotiations took over a year; the result was not a surprising step. We are now present in all of Asia and above all in China in the car and truck segment."

DaimlerChrysler already had ties to BAIC through its 37 percent share in Japan's Mitsubishi Motors, which manufactures sport utility vehicles together with its Chinese partner. It also owns 10 percent of South Korea's Hyundai Motors, which makes cars in China too.