BEIJING-- Zhejiang Geely Holding Group and Mercedes-Benz have received regulatory approval for a China-based joint venture to build electrified vehicles under the Smart brand.
The companies will each invest 2.7 billion yuan ($388.7 million) in the 50-50 venture, which will be based in the Chinese coastal city of Ningbo, the two automakers said in a statement on Wednesday.
Geely will develop a new generation of electric Smart vehicles that will be designed by Mercedes, the statement said.
The joint venture will build Smart models in a purpose-built electric-car factory in China with global sales due to begin in 2022, Mercedes parent Daimler said in a news release when the joint venture plans were first announced last year.
Since its launch in 1998, Smart has lost money. Financial analysts Evercore ISI estimates Smart loses as much as 700 million euros ($781.7 million) annually. Geely and Daimler are betting that young, city-dwelling consumers in China, will help to rejuvenate the brand.
Daimler will continue to produce the current generation of Smart vehicles at its Hambach plant in France and at Renault's Novo Mesto in Slovenia until the new factory is operational. Smart's ForTwo and ForFour cars share underpinnings with the Renault Twingo. After 2022, the Hambach factory will build electric cars for Mercedes.
Geely's Tong Xiangbei, 49, will be the JV's global CEO. Tong worked for Ford for 17 years, where he oversaw the development of production plants in the U.S. and China. He joined Geely in 2015 and led the completion of a factory to build the automaker's Lynk & CO brand.
Geely has expanded rapidly through mergers and acquisitions since buying Sweden's Volvo Cars in 2010 from Ford.
In 2018, it built a stake of almost 9.7 percent in Daimler and set up a ride-hailing venture in China with the German automaker.
Geely's latest announcement comes just over a month after BMW and Great Wall formed a venture to build electric Minis in China, the world's biggest market for electric vehicles, where demand for smaller EVs is on the rise.
Automotive News Europe contributed to this report