Daimler AG will produce its Mercedes-Benz-branded trucks in China, its largest market, as the German carmaker strengthens its localization efforts.

Foton Daimler, the company's Chinese joint venture, will invest over 3.8 billion yuan ($581.75 million) in a new plant in northern Beijing, and local production of heavy-duty tractor models specifically for the Chinese market will start in two years.

The joint venture with BAIC Group's commercial vehicle unit Foton was established in 2012. It now produces and markets Auman-branded trucks. In the first three quarters, its deliveries totaled 99,550 units－an increase of almost 60 percent compared to the same period in 2019.

The new Mercedes-Benz models will benefit from Daimler's global platform strategy and be powered by a state-of-the-art engine from Daimler's global powertrain unit, the automaker said in a statement on Wednesday.

At the same time, Daimler will continue to import and sell other models from its Mercedes-Benz portfolio.

"China, the world's largest truck market, is of utmost importance to us and has become one of our important markets for future growth," said Martin Daum, CEO of Daimler Truck AG.

Statistics from Daimler show that 1.1 million heavy-duty trucks were sold in China last year. The company estimated that half of its heavy-duty trucks sold globally this year will be in the country.

"To maximize this potential, we made the decision to produce Mercedes-Benz heavy-duty tractors in China for China," Daum said. "We're convinced that what we're announcing today is the right strategic move for the right market at exactly the right point in time."

Daimler started its localization effort in 2005 in China, with a Mercedes-Benz E-Class sedan rolling off the assembly line of its joint venture Beijing Benz Automotive.

In September, the three millionth Mercedes-Benz passenger car rolled off the assembly line in Beijing.

China is now the premium brand's largest market around the globe. In the first 10 months of this year, Mercedes-Benz sold over 610,000 vehicles in the country, up 10 percent from the same period last year.

Hubertus Troska, a Daimler AG board member responsible for its China operations, said: "We aim to grow in China and with China. That applies to our passenger cars as well as our commercial vehicle business."

He said the announcement of localizing Mercedes-Benz trucks in China not only marks a significant milestone in Daimler's localization strategy but is also an excellent example of Sino-German cooperation.

Daimler's cooperation is not limited to BAIC. Earlier this month, the automaker announced a plan to work on a new engine with Geely, which is Volvo's owner and Daimler's largest shareholder.

The two carmakers will use global R&D networks to work together on a next-generation gasoline engine designed for hybrid applications, in hopes of becoming more globally competitive and creating economies of scale.

The engines will be produced at the companies' powertrain facilities in Europe and China, which could be utilized by Mercedes-Benz together with its partners in China as well as the wider Geely portfolio of brands including Volvo. The companies also have the option of exporting the engines from China.