SIGNATURE MODEL: BYD Auto's first all-electric vehicle, e6, made its Detroit debut on January 12, 2010 (ZHANG JUN)

A recently formed business relationship between German auto giant Daimler AG and China's BYD Co. Ltd. probably won't see sparks fly, but is sure to be electric.

Under the agreement signed on May 27, the two companies will create a new brand for high- and medium-end electric vehicles designed and developed for the Chinese market under a Shenzhen-based joint venture.

BYD and Daimler will each hold a 50-percent stake in the venture with a registered capital of 600 million yuan ($87.85 million).

BYD, founded in 1995, was listed on the Hong Kong Stock Exchange in 2002. A former manufacturer of rechargeable lithium and nickel batteries, BYD has since expanded its business into producing alternative fuels and cars. BYD sold 450,000 vehicles last year, including the e6, a wholly BYD-developed electric car.

Some industry insiders consider the partnership a perfect match to promote the development of electric cars, which could mean future win-win opportunities for both sides.

New brand

The joint venture will combine Daimler's know-how in electric vehicle architecture and safety and BYD's excellence in battery technology and e-drive systems to develop a new generation of electric cars for the Chinese market, said BYD.

The two companies signed a Memorandum of Understanding in early March, outlining specifics of the partnership. A team consisting of designers and managers from both companies has been established to develop the new electric vehicle model. The brand name will not be decided until the new model's marketing campaign begins in 2013.

Upcoming brand aside, BYD and Daimler have previously launched their own electric vehicles. Daimler recently introduced the electric version of Smart Fortwo and will release two electric cars under the Mercedes-Benz brand later this year. BYD, with its battery expertise, successfully marketed two new energy powered vehicles: the plug-in hybrid, F3DM, and the electric car, e6. And in this new partnership, both bring their own distinct advantages to the electric table—while Daimler displays excellence in electric control and vehicle architecture and manufacturing, BYD boasts its reliable battery life and quick recharge expertise.

"We're going to work together to get this new model of electric car onto the market as quickly and efficiently as possible," said BYD's President Wang Chuanfu.

Electric marriage

The Chinese Government has supported the development of electric mobility with favorable policies and subsidies to promote the widespread usage of such vehicles across the country.

With its background in battery manufacturing, BYD has openly embraced the idea of creating electric vehicles, but lacked the merit of making conventional vehicles.

Still, BYD has led China's R&D efforts in developing electric vehicles, especially lithium iron phosphate batteries, said Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars.