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German automaker Daimler AG is reportedly teaming up with a unit of its Chinese partner BAIC Group to make an electric version of the Smart vehicle in China, as the Mercedes-Benz parent finds ways to raise sales of its tiny-car brand in cities worldwide.

Sources familiar with the matter stated that talks about the establishment of a joint venture are in progress with BAIC subsidiary Beijing Electric Vehicle Co. (BJEV) to manufacture battery-powered Smart cars in China.

As regards to the size of the stake in the reported joint venture, it was unclear how big the Stuttgart-based firm would want to hold, especially now that Chinese policymakers have decided to eased their 50 percent limit on foreign ownership of auto businesses.

Starting this year, overseas EV makers can now operate units on their own, while restrictions on passenger vehicles will end in 2022.

A spokeswoman for Daimler in China and representative for BJEV declined to comment on the report, while BAIC had no immediate remark.           

Daimler Rejuvenating the Smart Brand

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While other carmakers are broadening their presence in China to avoid potential risks posed by the tariff war between the US and China, Daimler’s joint venture is mainly intended for helping the local market and stopping the decline in sales of the Smart brand.         

In an effort to cap carbon emissions and improve urban air quality, China has earned the top spot in the EV market and is determined to guide the way towards electrification.

The country aims to boost sales of new-energy vehicles to 7 million units annually by 2025, which include plug-in hybrids, pure-electric, and fuel-cell vehicles.      

China’s EV market is currently dominated by local companies, although foreign carmakers have sought to get a piece of the world’s largest auto market via joint ventures or other strategies. Foreign companies typically need to partner with Chinese companies to operate in the country.

Daimler already purchased a stake of 3.93 percent in BJEV in March, an acquisition which the luxury carmaker said would allow it to further deepen its understanding of Chinese consumers’ needs, especially in the new energy vehicle (NEV) field.  

Smart now looks to young, urban consumers in the world’s biggest EV market for help in rejuvenating the brand after experiencing losses since its release in 1998.

Selling Smart cars turned out to be a challenge for German firm, as it struggled in several markets, particularly in the US. Deliveries of the brand globally fell nearly 7 percent in 2017 to 135,025 vehicles. Sales in China were not disclosed.

Daimler however, has been hoping that the Smart brand will attract customers seeking efficient and agile vehicles that are well-suited to dense cities.

The luxury carmaker also announced changes in top management of the Smart vehicle in May, as part of its strategic shift towards electrification.

In addition, Daimler has partnered with Warren Buffett-backed auto firm BYD Co. Ltd. to build pure EVs under the nameplate Denza.

The company is investing in EVs outside of China as well. Daimler has been building electric freight trucks and it plans to introduce a number of EVs over the next few years under the Mercedes-Benz brand name.

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