Nissan will produce the upcoming entry-level Mercedes CLA-Class sedan, plus a derivative for its Infiniti luxury brand, at its Aguascalientes, Mexico, plant beginning April 2017, industry sources say.

Cross/utility vehicle variants likely will be spun off the same platform for both the Mercedes and Infiniti brands as well, with production also targeted for Aguascalientes, industry insiders say.

The Mexico tie-up is part of a growing collaboration between the Renault-Nissan Alliance and Daimler, which will see the three auto makers share engine technology and production, as well as a small-car platform for the Renault and Smart brands.

Nissan has been hinting at the potential for adding Infiniti capacity in Mexico since late last year.

At the North American International Auto Show in Detroit in January, Infiniti top executive Johan de Nysschen told WardsAuto, “If we decide to enter a particular market segment, those cars may need a new manufacturing plant, (and) Mexico is an option.”

The new Infiniti line would be positioned below the new Q50, the replacement for the old G-series models that had its production launch last week at Nissan’s Tochigi plant north of Tokyo.

De Nysschen signaled plans for a new entry-level line in December, saying the Infiniti brand would broaden the lineup below the G lineup with premium compact sedans and CUVs that will appeal to younger buyers.

It is unclear what the new Infinitis will be called, but following the brand’s new nomenclature Q30 would appear logical for the sedan and QX30 a likely candidate for the CUV. Nissan applied for trademarks on both names late last year.

The shift in CLA sourcing from Europe to Mexico should increase profit margins for Mercedes in the price-sensitive entry-level luxury market, where healthy U.S. sales volumes will be needed for the brand to meet federal corporate average fuel economy targets.

The new CLA, based on the front-wheel-drive Mercedes A-Class architecture, is being built at Daimler’s Kecskemet, Hungary, assembly plant. Now hitting European markets, it is expected to reach U.S. shores in the fall.

Daimler will build about 24,000 CLA-Class sedans at the Hungarian plant this year, according to a WardsAuto/AutomotiveCompass forecast.

The CLA 4-door coupe is expected to be priced at about $30,000 in the U.S. It will come equipped with a 2.0L direct-injected, turbocharged 4-cyl. engine with peak output of 208 hp and 258 lb.-ft. (350 Nm) of torque. It is mated to a 7-speed dual-clutch automatic, with all-wheel drive optional.

Under the alliance between Daimler and Renault-Nissan, the first stage of which was announced in April 2010, a small-car platform will be shared by the Renault Twingo and Daimler’s Smart ForFour and shorter-wheelbase ForTwo, with production expected to begin next year.

Nissan also will produce Mercedes’ 1.8L turbocharged 4-cyl. gasoline engines at its Decherd, TN, factory beginning in 2014 for installation in both Mercedes and Infiniti models, and the two have additional engine-sharing and development programs under way.

Mercedes markets a small van called the Citan that is based on the Renault Kangoo and built at the French auto maker’s Maubeuge, France, plant. The Mercedes A-Class offers an engine that originated with Renault.

Daimler’s Mitsubishi Fuso commercial-truck operation will supply its Fuso Canter light truck to Nissan in exchange for a version of Nissan’s Atlas F24 model.

There also have been reports Mercedes and Infiniti will share production in Eastern Europe beginning in 2016 under a program that would see a small CUV built for Mercedes and cars badged as Infinitis.