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German sports and racecar firm HWA is to produce a high-performance road car for Mercedes next year. It is expanding manufacturing capacity at its Affalterbach facility and investing €4.5 million to prepare for low-volume car production.

The investment indicates that Mercedes-Benz – HWA’s main partner and customer – wants to step up its niche sports car production, possibly in response to Audi’s radical R8. HWA works with AMG on its DTM racecars.

“We’ve expanded our facility to prepare for a high-value ‘special cars’ (Strassensportwagen) project starting early next year,” said HWA. “We’re modifying racecars so they can be used as road-going sports cars.”

In 2000, HWA built and sold 25 CLK-GTRs, road-going versions of the GTR racecar that sold for €1 million each. In 2003, it built 180 CLK-DTM AMG cars – tuned versions of the CLK coupe and cabriolet – that sold for €250,000 each.

HWA has not revealed details of the new car, but it will build it in volumes of less than 400 a year.

HWA will recruit up to 25 engineers in the first phase of the car’s development. The company currently employs around 220 people to develop race cars, special vehicles and engines.

It is increasing its Affalterbach production area from from 1,200m sq to around 3,600m sq.