Mercedes-Benz revealed this early A-Class Concept at the 2011 NY Auto Show.

Copyright 2012

Nissan and Daimler are looking to take a significant step forward in their rapidly expanding partnership – the German maker expecting to set up a new plant that would be located adjacent to the new Nissan assembly complex going into Aguascalientes, Mexico, has learned.

The Daimler plant would be used to produce a wide range of small luxury products for both the German maker’s Mercedes-Benz brand and for Nissan’s Infiniti division, such as the Mercedes A-Class and Infiniti Etherea  – sources telling that these could include both conventionally powered and electrified offerings designed to help both makers improve their corporate fuel economy averages.

Officially, neither Daimler nor the Renault/Nissan Alliance would discuss the plan, though a spokesperson for the German company referred to a recent comment by CEO Dieter Zetsche in which he confirmed that further joint ventures are under study.  The two makers decided to launch a limited series of efforts in 2010 and have since announced several additional joint ventures including one revealed early this month in which they will produce a new line of four-cylinder engines at the Nissan powertrain plant in Decherd, Tennessee.

Mercedes will provide the premium compact platform for the vehicle Infiniti will base on its Etherea concept.

Daimler and the Renault/Nissan Alliance have also confirmed that the new MFA compact luxury car “architecture” will be shared with Nissan for the upcoming production version of the Infiniti Etherea concept unveiled at the Geneva Motor Show in March 2011.

Daimler has separately confirmed that it will use the MFA platform for at least five different models, including both the next-generation A- and B-Class lines.  Three models based on the MFA initially will be sold by Mercedes-Benz US, the first time the maker will have offered products that small in the States.

The challenge for the German maker is how to turn a reasonable profit on vehicles of that size.  It has become difficult enough on more conventional luxury products, such as the C-, E- and S-Class lines, what with the current lopsided exchange rates.  The maker hopes to improve the economics by producing the initial A-Class run in Hungary, where labor costs are substantially lower than in Germany.  But moving production to somewhere in the Americas would boost the business case substantially.

With the yen also trading at record levels against the dollar, Nissan faces similar challenges, especially with small cars, which is one of several reasons to expand in Mexico – though it also wants to support fast-growing demand in markets ranging from Canada to Brazil.

Nissan announced the new Mexican complex on Wednesday, revealing it will launch production in late 2013.  It will supplement two existing factories, including one already based in Aguascalientes, that have “maxed out,” as a high-level source told, and could help push production in Mexico from last year’s record of 600,000 vehicles to more than 1 million.

At a cost of $2 billion, the initial plan to produce just 175,000 B-segment vehicles did not add up, leading Nissan officials to acknowledge during a conference call Wednesday that they had other plans not yet ready to be discussed.  (Click Here for more on the Nissan announcement.)

Sources later told that the new Nissan assembly line is being designed so that it could eventually double and perhaps even triple the initial production capacity if it were to be operated like the maker’s other Mexican factories – which now operate at 23 hours a day.

But he and a separate ranking source at Daimler also confirmed that the sprawling Aguascalientes complex has been laid out with the idea that the German maker will eventually participate.

Indeed, there have been a number of reports – Click Here for one on this site – that have surfaced in recent days indicating Daimler wants to double global production capacity to 2.7 million by decade’s end and will add several new plants to help get it there.  This would include a plant in China and another in the Americas.

A second Daimler source cautioned that final details haven’t been worked out and could change before the go-ahead is given.  But, at this point, it appears the Germans want to put up their next plant in the Western Hemisphere next to Nissan’s new facility in order to take advantage of the existing supplier and distribution network and the inherent economies of scale.

The plant would produce a wide range of small models, all but certainly including the Mercedes A-Class, the Infiniti Etherea, and others based on the MFA architecture. Daimler has not yet confirmed it will sell the slightly larger B-Class (which also uses the MFA platform) in the States, but if the market continues trending towards smaller vehicles that would be a strong possibility.

Meanwhile, sources said the partners would almost certainly produce both gasoline and electric models.  Among the fast-growing list of joint ventures between Daimler and Renault/Nissan, they have agreed to help one another develop advanced battery-electric propulsion systems.

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