Rio de Janiero, March 7 (IANS/EFE) German automobile giant Mercedes-Benz will expand its commercial vehicle manufacturing unit in Brazil with a view to increase annual production capacity.

The facility at Sao Bernardo do Campo near Sao Paulo has been sanctioned a loan of 1.2 billion reais ($674.1 million) in order to increase production from 65,000 to 75,000 units annually.

The deal was signed Friday by the president of Mercedes-Benz do Brasil, Jurgen Ziegler, and the head of Brazil's BNDES state development bank, Luciano Coutinho, the lender said in a statement.

The plant which produces trucks, bus chassis, engines and components, will also develop new models of trucks and engines that meet the requirements of Brazilian environmental authorities, Ziegler said.

'The development of new truck models by local engineers will provide a boost to local engineering,' the BNDES's statement said.

The project to expand capacity and modernise the infrastructure at the 54-year-old plant calls for purchases of Brazilian-made machinery and equipment, it said.

It also involves construction of three new buildings for machinery maintenance, final inspection of trucks and the manufacture of packaging materials.

Mercedes-Benz's parent company Daimler AG said that funding was sought from BNDES so the new investments could be made 'within a narrow timeframe'.

'Brazil is a market with tremendous growth opportunities. We intend to fully exploit this potential, which is why the expansion of our production capacity is the right step at the right time,' Hubertus Troska, head of Mercedes-Benz Europe and Latin America at Daimler Trucks, said in a press release.