DaimlerChrysler AG on Monday signed a €1 billion ($US1.1 billion) deal to make Mercedes luxury cars and trucks in China, the world’s fastest-growing car market, Reuters reported.

The news agency said the pact with Beijing Automotive Industry Holding Co (BAIC), which already makes Jeep vehicles for Daimler, aims to produce 25,000 luxury cars a year by 2012, capturing about 10% of the segment.

Production of C-class compact sedans and E-class mid-sized cars was expected to begin in 2005 after an 18-month approval process by Chinese authorities, Reuters added.

Daimler and BAIC would spend one billion euros to restructure Beijing Jeep Corp, build a new plant and upgrade other facilities, Roman Fischer, chairman of Daimler’s China operations, told Reuters.

The deal included plans to make Mercedes trucks, heavy duty engines and other components with the commercial vehicle arm of BAIC, Fischer reportedly said.

Executives told Reuters that DC sold about 8,000 Mercedes cars in China last year and expects to sell 10,000 this year, 70% of which are the high-end S-class sedans.