Daimler said it would pay 625 million euros for the stake and two seats on the board.
The two firms have had a joint venture for ten years.
Under the deal, BAIC will increase its stake in the production joint venture Beijing Benz Automotive Corporation (BBAC) by one percent to 51 percent while Daimler will increase its stake in the integrated sales joint venture Beijing Mercedes-Benz Sales Service Corporation (BMBS) by the same amount.
"This strategic investment proves our long-term commitment to both the key market China and our trusted partner BAIC Motor. Going forward, the cooperation between Daimler AG and BAIC Motor will contribute towards increasing our footprint in China and so enable us to actively participate even better in the huge opportunities the Chinese automotive market offers," said Daimler's Chairman of the Board of Management and Head of Mercedes-Benz Cars, Dr. Dieter Zetsche, in a statement.
Beijing Auto Chairman Xu Heyi had described the deal as historic.
"This is another historical milestone in a partnership that has already seen great success in the past, with joint production and sales activities ranging from passenger cars to trucks. By further deepening our cooperation on a strategic level, the partnership between our two companies will face an even more prosperous future," he said.
As one of China's largest automakers, BAIC sold over 1.7 million vehicles in 2012.
Image: © Daimler AG
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