Daimler on Mar 29 began production at its E800 million ($1.07 billion) factory, located in Kecskemet, Hungary, about 90 kilometers southeast of Budapest, that will make the Mercedes B-Class compact. By heading so far east, Daimler CEO Dieter Zetsche is betting that Hungary's rock-bottom wages will allow the automaker to wring more profit from its small-car, luxury lineup. The Kecskemet plant, the first new Mercedes factory since the brand began producing cars in Alabama in 1997, will supplement Daimler's small-car factory in Rastatt, Germany, which underwent a E600 million expansion of its own. Combined, the Kecskemet and Rastatt plants will have an estimated capacity of 450,000 vehicles, equivalent to 35% of Mercedes car sales this year, according to IHS Automotive.