* Magna to start Infiniti production in 2014
* Infiniti car to be based on Mercedes A-class cars -report
* Nissan is targeting global Infiniti sales of 500,000 by 2016
TOKYO, May 10 (Reuters) - Nissan Motor Co said on Thursday that Magna Steyr, the European unit of Canada's Magna International, will assemble Infiniti compact cars starting in 2014, as the Japanese automaker raises overseas output of the premium brand.
Nissan wants to roll out the Infiniti worldwide to grab a greater share of the luxury market.
Last September, sources told Reuters of Nissan's plans to become the first Asian premium brand to manufacture in Europe by building Infiniti compact cars in the region.
Automotive News reported in December that Magna Steyr would build an entry-level Infiniti car based on Daimler's Mercedes A-class cars. The industry paper said Magna Steyr would likely produce the car at its factory in Graz, Austria.
Nissan and Magna were finalizing details of manufacturing and supply agreements, the two firms said in a joint statement.
Under a mid-term growth plan, Nissan is targeting sales of 500,000 Infinitis globally by 2016. Nissan sold about 146,000 globally, mostly in the United States, in the business year ended March 2011.
Nissan will announce results for the business year ended March 2012 on Friday.
Apart from competing with Japanese rivals Toyota Motor Corp and Honda Motor Co Ltd, which are also looking to catapult sales of their premium Lexus and Acura brands globally, Infiniti hopes to limit exporting from Japan due to the strong yen.
Last month, Nissan said it will begin building two Infiniti models in 2014 in China, where it expects the bulk of future Infiniti sales growth to occur.