German luxury automaker Daimler AG says it is buying a stake in the passenger car unit of its main Chinese partner to expand its presence in the world's biggest auto market.

Daimler said Friday it will pay 640 million euros ($875 million) for 12 percent of BAIC Motor, a unit of Beijing Automotive Industries Corp., with which it manufactures Mercedes Benz cars.

Daimler said the investment was in preparation for a possible initial public stock offering by BAIC Motor.

The German company said the deal will make it the first global auto brand to own a direct stake in a Chinese automaker.

All of the global automakers have joint ventures in China with local partners but until now have avoided such cross-ownership.