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Mercedes-Benz heads to China to build $740M EV battery factory

China's market is one of the hungriest for electric vehicles.

Daimler baut Batteriewerk in Peking
Daimler AG

If you want to build a bunch of electric cars, you're going to need a bunch of batteries, supplies of which are not exactly ample. That's why Daimler is plotting its own course and heading to China to build a battery factory.

Daimler announced Wednesday that it would be working with its Chinese partner, BAIC Motor, to build a battery factory in China. The €655 million ($740 million) factory will not only produce EV batteries, but it will build Mercedes-Benz battery-electric vehicles, also.

Factory exteriors don't exactly make for the most compelling pictures.

Daimler AG

"By 2025, the Chinese market will have a substantial share in sales of Mercedes-Benz electric vehicles," said Hubertus Troska, a Daimler AG board member, in a statement. "Therefore, local production will be key to the success of our EV portfolio, and crucial to flexibly serving local demand for electric vehicles."

The factory will be key to Mercedes-Benz's EV success in China. Building vehicles for China, in China, with the help of its business partner BAIC will allow Mercedes-Benz to skip the 25-percent tariff that apply to imported vehicles being sold in China. Keeping costs low for the consumer should bolster demand for its vehicles.

Daimler is set to dump about $1.13 billion into battery production around the world. The automaker already has a battery plant in Kamenz, Germany, which is set to receive a second battery factory on the premises. Between these two locations, Daimler should be able to furnish the batteries required for its first batch of electric Mercedes-Benz vehicles.

Mercedes-Benz could use all the help it can get when it launches its assault into the electrice-vehicle arena. While the company already produces some plug-in hybrids and battery-electric vehicles, the automaker plans to launch 10 new electric passenger vehicles by 2022. Mercedes-Benz hopes that EVs will comprise between 15 and 25 percent of its total vehicle sales by 2025.