Why Daimler and Nissan Are Going to Mexico

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June 27 (Bloomberg) -- Daimler AG and Nissan Motor will jointly produce luxury vehicles at a new 1 billion-euro ($1.4 billion) factory in Mexico, the biggest project to date in their four-year-old partnership. Edmunds.com's Ed Hellwig explains why on "Street Smart." (Source: Bloomberg)

Producing luxury vehicles and a new $1.4 billion factory.

It is the biggest to date in their four-year-old ownership.

The german and japanese automakers are assembling as many as 300,000 mercedes-benz and infiniti compact cars.

Will joint ventures be the wave of the future in the auto industry?

I am joined by the senior editor at edmonds.com.

You have two companies in competition with each other joining forces to use the same factory.

How unusual is this?

It is not completely unusual but these two companies have been creeping towards this for a long time so this is something that we have been expecting for quite a while.

It is something they obviously do not think will be a problem for the end consumer.

What does it help them do, control costs?

It is mostly about cost.

They are fans of splitting the costs on things the consumer does not see on their end.

The consumers are not going to care that their car is made in mexico at a plant by another company or know where it is made or by who.

They split the cost in the get different cars out of it.

And it is a win-win for them.

Matt miller joining me covering the auto industry.

At the same time i think consumers to some extent, and my buying a mercedes or am i buying an infiniti?

How do you distinguish between the brands question mark it would be a real problem for me.

If i buy a german car i would like it to be made in germany.

But maybe that is because i am so old.

Maybe the kids thing differently.

A lot of mercedes are made here in america.

That is an interesting point.

The fact that it is being made in mexico is an issue.

I was bringing up the fact that they are sharing this factory.

They are already sharing engines.

The cla which has been a successful small car for mercedes shares an engine that is produced in tennessee with the q50. what are we moving towards here?

A world in which a lot of these autos are similar and it is the branding and marketing that will distinguish them because to the point where new bar at -- why a german car you think of it as being made in germany by the car manufacturer itself, not in a plant that is shared with another.

It is a different level of car then mercedes is selling at the top and.

Cla is only $29,000. they probably not -- are not as concerned in these lower end cars.

The s class engine, if it were made with someone else, consumers may not be happy.

This is the future where carmaking may be the -- having.

And so i am thinking of transmissions and gearboxes.

It has been a case for a long time that people in the auto industry have been collaborating on transmissions and gearboxes.

Aren't there proprietary issues?

There are in some and not another's. he has been one of the early adapters of this culture, this kind of behavior, sharing technology and being able to lower costs.

It has to be good for mexico at least.

$1.4 billion in this new factory, i imagine a lot of jobs to go with it.

I think they said 5700 jobs total when the factories is up and running.

Mexico is quickly becoming a major player in terms of auto manufacturing.

There is a lot of companies with a lot of plants and there are more companies like audi and bmw that are considering mexico for future plants as well.

It is a lot closer geographically.

It makes it easier to ship those parts back to the u.s. that is definitely the way of now.

All carmakers are trying to do that is much as they can, even the luxury carmakers are trying to produce -- even harley davidson is making motorcycles in asia.

There is not a mormon or can brand because they are selling those motorcycles there.

You want to be close to your customers, that helps with costs.

This nationality does not factor in.

I happen to be wearing the hat.

Lamborghini is owned by audi and volkswagen.

Still separate factories but they use audi's all-wheel-drive technology on almost every

This text has been automatically generated. It may not be 100% accurate.

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