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UPDATE 1-Daimler joins rush to add more North American auto plants -report

(Adds details on Daimler investment.)

DETROIT, Sept 21 (Reuters) - U.S. automakers are facing mounting pressure amid slowing demand in the country, as Asian and European automakers aggressively ramp up vehicle production in North America, including a new investment by Daimler AG.

In the latest move, German automaker Daimler plans to spend $1 billion to expand its Mercedes Benz assembly plant near Tuscaloosa, Alabama, to produce batteries and electric sport utility vehicles that would compete with Silicon Valley electric car maker Tesla Inc's models, according to a person briefed on the matter. The Wall Street Journal reported the investment earlier on Wednesday.

Daimler's move to produce electric Mercedes Benz vehicles in the United States comes as the automaker has halted U.S. sales of Mercedes Benz diesels under scrutiny by U.S. environmental regulators.

A Daimler spokeswoman said on Wednesday the company planned a formal announcement about its plans later in the day.

Daimler is joining a rush to add vehicle-making capacity in a market that most analysts and industry executives expect to contract moderately over the next several years, following record sales of 17.55 million vehicles in 2016.

Indeed, Detroit's automakers are already temporarily idling factories and laying off thousands of workers as demand slows for their sedans and luxury cars.

Global automakers have come under pressure from U.S. President Donald Trump's bid to curb imports and hire more workers to build cars and trucks in the country.

The burst of investments to expand U.S. vehicle production capacity also reflects intensified competition for market share in the world's most profitable vehicle market.

Rival German luxury automaker BMW AG said in June it would expand its U.S. factory in South Carolina, adding 1,000 jobs.

Japan's Toyota Motor Corp and Mazda Motor Corp said in August they would join forces to build a new U.S. factory capable of producing up to 300,000 vehicles a year, with 4,000 new jobs.

Honda Motor Co earlier this week said it would expand production of Accord models at a factory in Ohio.

Volvo Cars, the Swedish brand owned by China's Zhejiang Geely Holding Group, is planning a second production line at a factory in South Carolina that is still under construction, according to people familiar with the plans.

Silicon Valley automaker Tesla Inc, meanwhile, is gearing up to produce as many as 500,000 Model 3 electric cars a year at its factory in Fremont, Calif., in an effort to increase its annual sales more than fivefold.

Tesla, like its German rivals, will export some of the new vehicles it plans. But if the company sold 500,000 Model 3's in the United States, it would become the largest luxury vehicle brand in the market, based on 2016 sales. (Reporting By Joe White; Editing by Bernadette Baum)