FRANKFURT: The executive board of German carmaker Daimler is due in the next fortnight to sign off on plans to build derivatives of its compact A Class model in Mexico, German monthly Manager Magazin reported on Sunday.

Daimler will set up production capacity at a plant operated by its alliance partner Nissan in Aguascalientes northeast of Guadalajara, the magazine cited unnamed company executives as saying.

Daimler and Nissan declined to comment.

With numerous free trade accords, a cheap and skilled labour force and proximity to the lucrative U.S. auto market, Mexico is attracting investment by foreign carmakers such as Audi and Honda Motor Co

Reuters reported in March that Daimler and Nissan had agreed plans for a 50-50 Mexican joint venture designed to produce future models for their Infiniti and Mercedes-Benz brands.

Sources previously told Reuters that an outline deal between the companies would see Nissan build the next-generation Mercedes GLA offroader and all-new Infiniti cars at its Aguascalientes plant.

Rival BMW is also nearing a decision to build its first assembly plant in Mexico, according to previous media reports.