Germany’s Daimler AG (DAI) has entered a contract with China’s battery-maker BYD Company Limited to form a 50:50 research and technology joint venture (“JV”) — Shenzhen BYD Daimler New Technology Co. Ltd.

The JV will develop electric vehicles (“EVs”) for the Chinese market utilizing Daimler’s expertise in EV architecture and safety as well as BYD’s excellence in battery technology and e-drive systems. Together, the companies will make an initial investment of RMB 600 million ($88 million) in the venture. The JV will launch their EVs under a new brand jointly created and owned by Daimler and BYD.

From its humble beginnings as a rechargeable-battery maker in 1995, the Shenzhen-based company BYD (“Build Your Dreams”) worked its way up to manufacturing the dual-mode hybrid electric vehicle F3DM in 2008. In 2009, the company launched upgraded versions of F3DM, including F5 and F6.

BYD has been trying to become a major EV maker in the world. Last year, the company revealed its plan to sell a few hundreds of e6 in the U.S. in 2010. No doubt, the partnership with Daimler would strengthen the company’s foothold in the EV technology.

Daimler has been developing automotive designs for zero-emission driving. The company has recently launched the EV version of its popular smart fortwo cars. It also plans to launch two Mercedes-Benz electric cars, including the B-Class F-CELL with fuel cell technology and the A-Class E-CELL. Recently, Daimler entered the Renault-Nissan alliance in order to share the development of vehicles and engines with France’s Renault and Japan’s Nissan Motor (NSANY).

The Chinese government is backing the industry’s thrust towards EVs as well. Large fleet owners in China, both regional governments and taxi companies, are entitled to get subsidies worth up to $8,800 per vehicle if they buy EVs. EVs — convenient for traveling in short distances — are becoming popular in China as car owners in the country are reluctant to travel long distances in their own vehicles.
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