In an effort to widen its scope in the world’s largest auto market, China, Daimler has announced a joint venture with Zhejiang Geely Holding Group to build all future models in the subcompact segment.

Following an official statement on Thursday, Daimler stated that the 50-50 joint venture, aims to generate Smart models in a purpose-built electric-car factory in China with global sales expected to commence in 2022.

The deal is expected to be finalised by the end of 2019.

The German auto giant will share its expertise in manufacturing, engineering and design with Geely where Mercedes designers will style future Smart vehicles and Geely will engineer them. Daimler stated that the vehicle-development program aims at placing the Smart product portfolio into the “fast-growing” B- (subcompact) segment.

While the companies did not disclose any financial aspects of the deal, details of the joint venture are expected to be finalised by the end of this year.

Zetsche said Geely will be a “strong partner” in the electric vehicle segment. “We will jointly design and develop the next generation of Smart electric cars that combine high-quality production and known safety standards for sale both in China and globally,” Zetsche said in the news release.

Smart’s global sales fell 4.6 per cent to 128,802 units last year. In the U.S., Smart sales last year plunged 58 per cent to a mere 1,276 cars. Expensive development of electric vehicles has made it difficult for automakers to enter the mass market arena with their iterations, leading to several of them to strike alliances with Chinese partners. The German company’s regional rival BMW recently unveiled plans to build electric Minis in China, where production costs are low and demand for small electric cars is rising.

Ahead of this, Daimler was reportedly in talks with a unit of Chinese partner Beijing Automotive Group to build an electric version of the ForTwo two-seater model in August.