Chinese battery and electric car maker BYD Co will team up with German car maker Daimler AG to jointly develop electric vehicles and related spare parts in China.

In a statement filed to the Hong Kong stock exchange yesterday, BYD said both companies believed that zero-emission environmental-friendly vehicles will drive the global automotive industry.

The two firms have signed a memorandum of understanding, which includes a joint venture for technical research on electric cars, transmission systems, spare parts and batteries.They will launch a jointly-owned new brand for the Chinese market initially.

Brian Link, managing director of the automotive division of Ernst & Young in Shanghai, said China has made progress on infrastructure and costs of production have been reduced.

"The strong auto sales in China would provide opportunities for mid and small passenger cars, especially electric cars,this year will be the right time for China's new energy vehicle market to take off," said Link.

Analysts said the tie-up seeks to combine BYD's battery expertise and Daimler's car-making experience to create a winning situation.

Daimler, the maker of luxury cars under Mercedes-Benz, Maybach and Smart brands, follows fellow German car maker Volkswagen as it eyes a piece of China's new energy vehicle market. Last year, VW signed a similar cooperation deal with BYD to research electric batteries.

BYD, backed by billionaire Warren Buffett, is one of the pioneers in developing electric vehicles in China.It will begin selling its electric cars in the United States at the end of this year.