* Daimler seeks 10-20 pct in BAIC Motor as part of IPO-source
* BAIC Group said would list passenger car unit in 2013
* Daimler tries to overcome weakness in Chinese market
By Arno Schuetze and Edward Taylor
FRANKFURT, Jan 11 (Reuters) - German luxury carmaker Daimler is eyeing a stake in the passenger car unit of its Chinese partner BAIC Group, in a bid to overcome its weakness in the world's largest car market, three people close to the plans said.
"When BAIC Motor is floated, Daimler may take a stake of 10 to 20 percent," one of the sources said on Friday, adding the size of the stake depended on discussions with its Chinese partner.
Daimler, the maker of Mercedes-Benz cars, declined to comment while BAIC, China's fifth largest automaker, was not immediately available for comment.
The chairman of state-controlled BAIC, Xu Heyi, told Reuters in September that it aims to list its passenger car subsidiary BAIC Motor in 2013, hoping to raise around 10 billion yuan ($1.6 billion).
Two sources close to the transaction said BAIC Motor is expected to be listed in Hong Kong this year, targeting a volume of at least $1 billion, while other sources cautioned that an initial public offering (IPO) may be delayed until next year.
Goldman Sachs and Morgan Stanley have been mandated to organise the listing, the sources said.
A BAIC investment may help Daimler to get its ailing China business back on track. While China has become Mercedes-Benz's No. 3 market, after Germany and the United States, Daimler's luxury unit trails its rivals BMW and Audi in sales.
Proceeds from the IPO, which would see BAIC follow rivals Dongfeng Motor Group Co and Geely Automobile Holdings Ltd onto the Hong Kong stock market, will be used to develop its own passenger car business, Xu Heyi had said at the time.
Under partnerships with Daimler and Hyundai Motor , BAIC makes Mercedes and Hyundai-branded cars for sale in China and also has its own-brand small car, the E150.
In 2009, China eclipsed the United States as the world's
largest auto market by volume, but Chinese automakers still rely heavily on locally made foreign brands.