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Nissan, Mercedes team to construct new Mexican car plant

Mercedes-Benz sedans sit inside a car carrier before

Mercedes-Benz sedans sit inside a car carrier before being hauled away for distribution from the automaker's Vehicle Processing Center in Baltimore on March 27, 2014. Photo Credit: AP

Daimler AG and Nissan Motor Co. will jointly produce luxury vehicles at a new $1.4 billion factory in Mexico, the biggest project to date in their 4-year-old partnership.

The German and Japanese automakers will assemble as many as 300,000 Mercedes-Benz and Infiniti compact cars at a facility near Nissan’s plant in Aguascalientes, the companies said Friday in a joint statement. The first cars are due to roll off the line in 2017.

“This project shows how our collaboration, which began in Europe, has become global in scope,” Carlos Ghosn, chief executive of Nissan and its French affiliate, Renault SA, said in the statement.

Daimler has cooperated with the Renault-Nissan Alliance since 2010. The partnership, which was initially focused on city cars and delivery vans, has since expanded to include motors and transmissions. The latest step would help Infiniti expand its lineup and lower costs for Mercedes as the Stuttgart-based carmaker seeks to surpass BMW in sales and profit by the end of the decade.

Daimler and Nissan will establish a 50/50 joint venture to manage the construction and operation of the Mexican factory, which will eventually employ almost 5,700 people. Production of Infiniti models is slated to start in 2017, with Mercedes cars to follow a year later. The companies expect to reach full capacity at the site in 2021.

The two upscale brands will cooperate to ensure their respective vehicles differ from one another, they said.

The auto-assembly agreement is the latest cooperation between the upscale Mercedes and Infiniti brands. Production of four-cylinder engines, which will be used in the Mercedes C- Class and Infiniti Q50 sedan, started Thursday at a Nissan plant in Tennessee.

The new Mercedes-Infiniti factory will be adjacent to Nissan’s $2 billion plant in Aguascalientes, which opened in November. The Yokohama-based carmaker assembles the Sentra compact sedan at the plant.

With the decision, Mercedes is following Audi AG’s move to produce in Mexico. The world’s second-largest luxury-car brand plans to start assembling sport-utility vehicles in San Jose Chiapa in 2016. BMW is considering sites in Mexico for a new North American factory, people familiar with the matter said in April.

Renault and Daimler already cooperate on mass-market compacts. The French manufacturer’s Twingo shares the same underpinnings as an upcoming four-seat version of the Smart city car. Both models are built in Renault’s plant in Novo Mesto, Slovenia.

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