FRANKFURT (Bloomberg) -- Daimler AG will build an engine factory in China as part of a 3 billion-euro ($3.7 billion) investment in the country as demand booms.
The company plans to build the Chinese plant because it's cheaper to serve the local market from within the country, spokesman Florian Martens said. The factory will start production in 2013, he added.
Daimler, which aims to sell at least 100,000 cars in China this year, is seeking to close the gap with luxury leader BMW AG and fend off Volkswagen AG's Audi. Daimler today raised its profit forecast for the Mercedes-Benz unit for the second time in six weeks on the global recovery.
“This investment should allow them to take advantage of their very strong Mercedes brand in this growing market,” said Philippe Barrier, an analyst at Societe Generale. “It would even make sense to think about full assembly if they manage to sell 300,000 cars.”
Daimler is targeting China, which passed the U.S. as the world's largest automobile market last year, by introducing an extended version of the E-class sedan, its first vehicle designed specifically for the country. Chinese passenger-car sales surged 64 percent to 4.63 million vehicles in the first four months of the year. Deliveries of Mercedes-Benz vehicles in China more than doubled in the first quarter.
“China is increasingly becoming the center of gravity of the automotive industry and has recently become Mercedes-Benz Cars' third-largest sales market,” Chief Executive Officer Dieter Zetsche said in a statement on Friday.