Daimler joins rush to add more North American auto plants

DETROIT (Reuters) - U.S. automakers are facing mounting pressure amid slowing demand in the country, as automakers from Asia and Europe aggressively ramp up vehicle production in North America, including a new investment by Daimler AGDAIGn.DE.

Daimler AG sign is pictured at the IAA truck show in Hanover, Germany, September 22, 2016. REUTERS/Fabian Bimmer/File Photo

In the latest move, German automaker Daimler said on Thursday it will spend $1 billion to expand its Mercedes Benz operations near Tuscaloosa, Alabama, to produce batteries and electric sport utility vehicles that would compete with Silicon Valley electric car maker Tesla Inc's TSLA.O models.

More than 600 new jobs will be created in Daimler’s plan, which includes building a facility in 2018 near the Tuscaloosa plant to produce batteries for zero-emission vehicles, the carmaker said. It also plans to build a new global logistics center and new after-sales North American hub.

Daimler’s move to produce electric Mercedes Benz vehicles in the United States from about 2020 comes as the automaker has halted U.S. sales of Mercedes Benz diesels under scrutiny by U.S. environmental regulators.

The company is joining a rush to add vehicle-making capacity in a U.S. market that most analysts and industry executives expect to contract moderately over the next several years, following record sales of 17.55 million vehicles in 2016.

Indeed, Detroit’s automakers are already temporarily idling factories and laying off thousands of workers as demand slows for their sedans and luxury cars.

Global automakers have come under pressure from U.S. President Donald Trump’s bid to curb imports and hire more workers to build cars and trucks in the country.

Related Coverage

The burst of investments to expand U.S. vehicle production capacity also reflects intensified competition for market share in the world’s most profitable vehicle market.

Rival German luxury automaker BMW AG BMWG.DE said in June it would expand its U.S. factory in South Carolina, adding 1,000 jobs.

Volkswagen AG's VOWG_p.DE brand president Herbert Diess told reporters last month the company expects to bring electric SUV production to the United States and could add production at its Tennessee plant.

Japan's Toyota Motor Corp7203.T and Mazda Motor Corp7261.T said in August they would join forces to build a new U.S. factory capable of producing up to 300,000 vehicles a year, with 4,000 new jobs.

Honda Motor Co earlier this week said it would expand production of Accord models at a factory in Ohio.

Volvo Cars, the Swedish brand owned by China’s Zhejiang Geely Holding Group[GEELY.UL], is planning a second production line at a factory in South Carolina that is still under construction, according to people familiar with the plans.

Silicon Valley automaker Tesla Inc TSLA.O, meanwhile, is gearing up to produce as many as 500,000 Model 3 electric cars a year at its factory in Fremont, Calif., in an effort to increase its annual sales more than fivefold.

Tesla, like its German rivals, will export some of the new vehicles it plans. But if the company sold 500,000 Model 3’s in the United States, it would become the largest luxury vehicle brand in the market, based on 2016 sales.

Additional reporting by Andreas Cremer and David Shepardson; Editing by Bernadette Baum