Addressing a business conference in Calcutta, Edzard Reuter, chief executive of Germany's leading industrial conglomerate, said Daimler was talking to two potential partners, including Tata Engineering and Locomotive (Telco).
He said Daimler expected to invest a little over £200m in the joint venture. "As part of our industrial globalisation policy, we are looking hard at the future growth markets," Heinz Gottwick, a spokesman for Mercedes-Benz, the auto subsidiary of Daimler, said.
The German car manufacturer is also bidding to build a family car in China, where it presented its Family Concept Car late last year at an international beauty contest for the Chinese authorities.
Mr Reuter said Mercedes was considering a similar sort of vehicle for India, with an eye on the South-east Asia market.
The decision to plant the Mercedes production standard across the key markets of the world, and expand the model range of the traditional luxury vehicle maker to cover such different customers, marks the most significant shift in Mercedes' strategy in recent years. It is already the most global company in trucks, manufacturing in 50 countries.
The decision to build a plant in the US, in Alabama, to produce a sports utility vehicle, underscored the shift in thinking away from the traditional export-oriented, made in Germany strategy. Mercedes exports more than half its production, and sees little scope for expansion in this direction. "If we want growth then we have to produce on the spot in the big markets," Mr Gottwick said.
He expressed confidence that the Indian deal to produce a new car would be finalised this year.
An already-announced joint venture between Daimler Benz and Telco will begin producing luxury cars and engines in March, Mr Reuter said. Daimler Benz and Telco are equal partners in the £42m project, which is based in the western city of Pune.
It will produce 20,000 cars and 60,000 diesel and petrol engines a year. "We are going to export the bulk of the production to different parts of the world," Mr Reuter said, adding that Daimler's commitment to India is long term.Reuse content