Mercedes-Benz has officially confirmed the development of an A-Class-based SUV to rival the BMW X1 and Audi Q3 compact-SUVs.

The A-Class is the company’s second new compact model, following the start of production of the new B-Class at the Rastatt in September 2011. “This start of production marks a further milestone in our Mercedes-Benz 2020 growth strategy. Speaking at a conference at Mercedes’ Rastatt plant in Germany, Daimler Chief Executive Dieter Zetsche said, “The A-Class represents our offensive in the compact segment,.. and there is more to come: The compact SUV will be the third model we will build here in Rastatt.”

Daimler has budgeted €1.2 billion for the production of the new compact models at the Rastatt plant. In a two-phase plan, €600 million has already been spent on construction of a new body shop and associated tooling, while the second phase will see further €600 million invested in modifications of the assembly and corresponding equipment installations in the bodyshell production. Another €400 million will be invested in the powertrain plants this and next year for production of components solely used in the new compact models. 900 new jobs have been created at the Rastatt plant as a result of the new investment thus far.

According to Mercedes, it has received more than 40 000 orders since the start of sales of the A-Class in mid-June, while 70 000 B-Class vehicles have already been delivered since its market launch in November 2011.