The signing ceremony was held in the presence of German Chancellor Dr. Angela Merkel and the Chinese Prime Minister Wen Jiabao. Attending were Dr. Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars, Ulrich Walker, Chairman and CEO of Daimler Northeast Asia, and Xu Heyi, Chairman of BAIC.

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. The projects agreed upon are further central elements of our China strategy for the sustainable development of our business. As early as 2020, at least one in five premium compact cars is expected to be sold in China. In the light of this enormous growth potential, we are resolutely switching to attack mode with the local production of our new compacts.

—Dr. Dieter Zetsche

The agreement includes the following projects:

• Local passenger car production for the Chinese market will be expanded to include the GLK compact SUV as of 2011 as well as three models of the new generation of Mercedes-Benz premium compact cars. The first of these models will be produced as of 2013; the two others will follow step by step.

• Current production capacities of about 80,000 units for the C-Class and the E-Class long version will be further expanded in line with market demand.

• As of 2013, a new engine plant will produce 4-cylinder gasoline engines, which will be used in locally produced Mercedes-Benz passenger cars and vans. The planned technical capacity of this engine plant will be expanded to 250,000 units, of which up to 100,000 units per year will initially be utilized. Further capacity utilization can be ramped up in line with further sales growth.

• A new R&D center will be established, which will mainly focus on vehicle testing and adaptation as well as R&D activities with suppliers.

These investments are part of the overall investment program, according to which Daimler and its partners will invest a total of about €3 billion (US$4.3 billion) in China in the next few years.

Daimler notes that there is an enormous growth potential in the premium compact segment in China. While in 2010 some 770,000 Chinese customers decided to buy a vehicle of that segment, the company expects this market to grow to more than 2 million units annually by 2020. This would boost China’s share of global premium compact sales to more than 20% from the current 12% and make it the largest market for premium compacts worldwide.

Local production of Mercedes-Benz passenger cars began in 2006 at the 50/50 joint venture BBAC with the predecessor of the current E-Class. In spring 2008, the C-Class joined local production as the second model. Since May 2010, BBAC is producing the current E-Class as a long-wheelbase version especially customized to meet the requirements of the Chinese market.

On the sales side, Mercedes-Benz passenger cars are represented in China with the full product portfolio. In 2010, more than 148,000 vehicles were sold, surpassing 2009 sales by 112 percent. From January through May 2011, 75,896 vehicles sold—an increase of 62% compared to the corresponding period in 2010. The sales network included more than 160 dealerships in about 80 cities and will grow by more than 30 new dealerships in 2011.

Other activities in China include the joint venture Fujian Daimler Automotive Ltd., which started production of Mercedes-Benz vans in April 2010. Also in 2010, Daimler expanded its industrial activities with the signing of a joint venture agreement with the Chinese truck manufacturer Foton Motor to produce medium and heavy-duty trucks. Since 2009, Daimler Financial Services has offered vehicle leasing through Mercedes-Benz Auto Finance China. In addition, Daimler and BYD maintain the joint venture Shenzhen BYD Daimler New Technology Co. Ltd for the development of an electric vehicle for the Chinese market. The joint venture was officially approved in March 2011.