SHANGHAI—Daimler AG and Zhejiang Geely Holding Group Co. will form a premium ride-hailing company in China, using the German auto maker’s Mercedes-Benz cars and electric vehicles made by Geely, the companies said Wednesday.

A partnership between the Chinese car maker and Daimler has looked likely ever since Geely Chairman Li Shufu amassed a 9.7% stake in Daimler in February, becoming its largest shareholder. Geely also owns Sweden’s Volvo Car Group.