Daimler is set to invest a whopping €1 billion ($1.1 billion) to build a new Mercedes-Benz plant in Kecskemét, Hungary. The planned facility is expected to generate some 2,500 jobs in the area.

Of course, that’s when the plant starts producing vehicles, which is estimated for sometime around the end of this decade. Initial preps for the facility will start sometime within the current year.

This will be the second Mercedes-Benz plant in Kecskemét. The company has already announced a new round of investment in order to expand as well as upgrade the existing facility. The €580 million investment for the existing plant, which started operations in 2012 and cost €800 million to construct, allows it to provide ramped-up production of the compact cars it currently makes as well as possibly accommodate newer models, especially plug-in hybrids. Mercedes-Benz announced that it was planning on introducing 10 plug-in hybrid models next year.

Hungary makes a lot of business sense for Daimler and Mercedes-Benz, given that the country has lower wages compared to Germany and most eurozone countries. With plans to expand its vehicle model portfolio from 32 to 40, a new facility is just what the company needs to meet its production demands and targets. Hungary is perfect for this purpose.

Mercedes-Benz is looking to make the new plant a ‘flex plant’. This means it won’t just focus on compact cars like its older counterpart. It’s possible the new facility also accommodates SUVs and larger sedans.

In addition, the new plant is slated to feature a body shop and a paint shop. It will accommodate final assembly and also have a supplier park.

The Kecskemét plant had already rolled off some 500,000 units since it started operations. Out of that, around 180,000 compact cars were produced in the previous year alone. The lineup manufactured by the plant includes the B-Class, CLA Coupe, and CLA Shooting Brake.