Daimler and Nissan are teaming up to develop small cars according to a Reuters report. The joint investment totals $1.36 billion and will involve building a plant in Central Mexico along. The plant will have the ability to pump out 300,000 cars annually.

The joint venture will strengthen the bond between Mercedes-Benz and Infiniti brands. The two brands will work side-by-side on research, design and production of the premium compact cars.

Here’s the plus side for both companies. Nissan gets to take advantage of the foundation laid by Daimler’s Mercedes Benz. Daimler gets its first North American production site for smaller vehicles.

Why is a North American production site so important? Daimler can ship vehicles to the U.S. without getting hit by currency costs and tariffs. Plus, it’s Mexico. Labor costs are a fraction of what they are in the U.S.

Chief Exec of Renault-Nissan Carlos Ghosn had this to say according to Reuters, the “joint development of compact premium vehicles and joint production in Aguascalientes together represent one of the largest projects” between the two companies.

With the two sides working so closely, is a merger possible? “The cooperation is so successful because it is not the result of a merger,” said Daimler Chief Dieter Zetsche.

Maybe the saved costs will lead to cheaper Mercedes-Benz in the States? Wishful thinking I know, but one could hope.

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