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FRANKFURT— Daimler AG DAI.

XE +0.92% will decide next year whether to build a second car factory in North America to take advantage of the sales momentum at its Mercedes-Benz brand in the U.S., its biggest market.

Daimler is investing heavily in Mercedes-Benz in the hope of returning the brand to the top spot among the world's premium car makers in terms of sales ahead of current market leaders BMW AG BMW.XE +0.67% and Volkswagen AG VOW3.XE +1.10% 's Audi NSU.XE -0.75% unit.

Strong sales of Mercedes-Benz's new CLA coupe in the U.S. over the past weeks have encouraged Daimler to consider adding capacity in the North American Free Trade Agreement region, said Andreas Renschler, Daimler's board member for Mercedes-Benz car production.

"A decision on where we'll build [a factory] will be made next year," Mr. Renschler said.

"We have to consider whether we need new production capacity in the Nafta region for the next model generation of compact cars," Mr. Renschler said. "In growth markets one needs to be local; cars should be built where they're sold."

The auto maker current builds M-Class, R-Class and GL-Class vehicles at a plant in Alabama. It aims sales of its Mercedes-Benz cars to pass rivals Audi and BMW as the best-selling luxury brand world-wide by 2020. Daimler is poised to dethrone BMW's namesake brand from the top spot in the U.S. this year. As of the end of November, its Mercedes brand had sold about 7,600 more cars in the U.S. than the BMW brand.

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