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(CNN Business) —  

Daimler has teamed up with Geely to transform its Smart brand into an electric carmaker focused on China’s vast market.

Under the agreement announced Thursday, the next generation of Smart cars will be assembled at a plant in China with sales starting in 2022. Prior to that, Daimler will continue to produce Smart cars at plants in France and Slovenia.

“Our smallest vehicle still has huge potential — in China and beyond. Geely is the right partner to take advantage of these opportunities,” Daimler (DDAIF) CEO Dieter Zetsche wrote in a blog post.

Daimler and Geely will each own 50% of the global joint venture. The financial terms of the deal were not disclosed. Daimler said no jobs would be lost as a result of the agreement.

Mercedes-Benz owner Daimler launched its Smart brand two decades ago, but the tiny cars never caught on with consumers. Only 130,000 Smart cars were sold worldwide in 2018.

A worker cleans a Smart Forease electric concept at the Geneva Auto Show in March.
Stefan Wermuth/Bloomberg via Getty Images
A worker cleans a Smart Forease electric concept at the Geneva Auto Show in March.

Yet the brand’s focus on urban mobility and electric technology makes it attractive to Geely (GELYF), which already owns Volvo and is based in the world’s largest market for electric cars.

The Chinese government has encouraged carmakers to develop and sell electric cars by offering generous subsidies and tax breaks. China accounts for about half of global electric car sales.

Daimler had already announced plans to focus entirely on electric drive Smarts by 2020. It said sales of the existing electric Smart model doubled in 2018.

Other global automakers, including Daimler’s Germany rivals Volkswagen (VLKAF) and BMW (BMWYY), are investing heavily in electric cars and new mobility technology.