HONG KONG (Reuters) - Chinese automaker BAIC Motor, partly owned by Daimler AG (>> Daimler AG), plans to raise up to $2 billion (1.2 billion pounds) in a Hong Kong initial public offering this year, capitalising on the strong growth prospects for the world's biggest auto market.

Thomson Reuters publication IFR, citing sources familiar with the plans, reported on Friday that the IPO was likely in the second quarter of 2014.

China's auto market is expected to see a second year of double-digit growth, helped by an anticipated array of economic stimulus measures and robust demand for cars in smaller cities in interior regions, according to industry executives and analysts.

Goldman Sachs (>> Goldman Sachs Group Inc) and Morgan Stanley (>> Morgan Stanley) have been working on the BAIC IPO since 2013.

BAIC Motor has now added Citic Securities International (>> CITIC Securities Company Limited), Deutsche Bank (>> Deutsche Bank AG) and HSBC (>> HSBC Holdings plc) to the roster of banks managing the deal after a pitching process for mandates last month, IFR said.

BAIC Motor is the passenger car unit of state-owned Beijing Automotive Group (BAIC) . In November, Daimler sealed a deal to buy a 12 percent stake in BAIC Motor for 640 million euros to boost its China presence.

Daimler's Mercedes-Benz brand is now the smallest of the big three German luxury carmakers after BMW (>> Bayerische Motoren Werke AG) and Volkswagen's (>> Volkswagen AG) Audi because of difficulties in cracking the China market. Daimler's rivals together dominate the global market for high-end saloons and SUVs.

(Reporting by Fiona Lau of IFR; Writing by Elzio Barreto; Editing by Kenneth Maxwell and Miral Fahmy)