Mercedes-Benz maker Daimler and Chinese auto giant Geely announced plans Thursday to develop the next generation of electric Smart cars to be made in China in a joint venture.
Under the agreement, expected to be finalised by the end of the year, the new vehicle will go on global sale in 2022, the German and Chinese car giants said in a statement.
The 12-strong board of directors of the new venture will be made up of six executives from each company.
The new Smart cars will be styled by the Mercedes-Benz Design network with engineering provided by Geely.
Prior to the launch of the next generation, Daimler will continue to produce the current "fortwo" model of the Smart car at its plant in Hambach, northeastern France.
The Smart car will then leave its historic home in France to be manufactured in China, but Daimler insists no jobs will be lost.
- 'New beginning' -
"None of our colleagues at Smart will lose their jobs as a result of these decisions," said Daimler boss Dieter Zetsche in a statement.
"On the contrary. We need the passion and creativity of the Smart team more than ever.
"After all, these changes are no ending for Smart –- but a new beginning."
Daimler says 500 million euros ($562 million) will be invested in the Hambach plant, which will assume "an additional role" producing a compact electric vehicle under the new 'EQ' product brand.
"All jobs will be sustained through our new project which will consist of creating a new assembly line for the construction of a Mercedes-Benz electric SUV in Hambach," Serge Siebert, CEO of Smart France, told the Le Republicain Lorrain newspaper on Wednesday.
Geely is owned by Chinese billionaire Li Shufu, who is also Daimler's main shareholder having acquired nearly 10 percent in the German manufacturer in February 2018.
Chancellor Angela Merkel welcomed the move, saying "we are open to trade partners and at first glance do not see any violations".
The rise of the Chinese car giant has been swift.
Founded in 1986, Geely was originally a low-cost home appliance manufacturer before founder and boss Li transformed it into an auto group in the late 1990s, becoming one of China's leading private manufacturers.
- 'Made in China' -
In 2010, while Geely and its entry-level vehicles represented only a few percent of the Chinese market, the group paid $1.5 billion to buy Volvo Cars.
The bold move saw the Chinese company acquire a premium Swedish brand, known for the safety and the robustness of its models.
The following year, Geely invested $11 billion in Volvo to launch a new line of cars, which saw the brand take off in China.
Last week, Geely reported worldwide sales of 2.15 million vehicles (up 18.3 percent year on year) and announced a net profit for 2018 of 1.66 billion euros (up 18 percent on 2017) on a turnover of 14.1 billion euros (up 15 percent).
Daimler can boast similar sales figures, with Mercedes Benz shifting 2.4 million vehicles in 2018, including 130,000 Smart cars in 40 markets worldwide.
The German group's net profits last year were 7.6 billion euros, down 30 percent on 2017, with sales of 167 billion euros, up two percent.
Following the 2013 acquisition of British taxi manufacturer, 'The London Taxi Company', Geely made a burst of investments in 2017 to strengthen itself, particularly in Europe.
It snapped up iconic English sports car Lotus and American start-up Terrafugia, designer of futuristic flying cars, while Geely also became the largest shareholder in the Volvo group with a reported investment of 3.25 billion euros.
"I want the whole world to hear the cacophony generated by Geely and other made-in-China cars," Li told Bloomberg in 2011.