Due to strong demand, Daimler-Benz plans to begin producing its Mercedes-Benz M-Class sport utility vehicle next year in Austria for the European market.

Daimler-Benz expects to sign an agreement with its Austrian partner, Steyr-Daimler-Puch-Fahrzeugtechnik AG & Co KG, in September and start producing up to 30,000 vehicles annually in Graz in mid-1999, said Juergen Hub-bert, chairman of Daimler's automobile division."Since Chryslers are also assembled there, we can . . . reach the expanded capacity quicker and at lower cost," he said Thursday.