The second biggest producer of luxury cars in the world - Daimler AG, plans to build an automotive plant for manufacturing Mercedes-Benz cars in Hungary. This will be the first plant of Daimler in Eastern Europe and will be built as a part of the increase in the production of small cars, which will cost the company 1.4 billion euro.

Daimler will invest 800 million euro in the Hungarian plant and 600 million euros in a plant in the German city Rastatt, the company announced today. Stuttgart-based Daimler plans to add two compact model to present its class A and B models of small cars.

Daimler, which is also the biggest producer of trucks in the world, strives to increase operating profit from the sales of Mercedes-Benz cars to 10% by 2010, compared to 9.1% in 2007. The lower cost of labour in Hungary, where workers typically receive less than 10 euro per hour, compared to 44 euros in Germany, should help the company to increase its profits.

The new plant of Daimler in Hungary will be built in the city Kechkemet, which is located about 80 km southeast of Budapest. The plant will have 2 500 employees. The company hopes to start to manufacture cars till 2012. Romania and Poland were also considered as options for its deployment.

Mercedes-Benz relies on models from A and B class of the company to contribute to record sales this year. Since Daimler hopes to regain some of the market share of Bayerische Motoren Werke AG, which at the moment is the biggest producer of luxury cars in the world, by countering the competition from Audi and Lexus.