Daimler, BYD set up China venture

BYD Co., the Chinese automaker backed by billionaire Warren Buffett, and Daimler have set up a venture to develop electric cars in the world's largest auto market.

Daimler, the world's second-biggest manufacturer of luxury cars, and BYD will invest $88 million in the 50-50 partnership in China, Daimler said in a statement.

Daimler is pushing into electric-vehicle production in China to challenge luxury leader BMW, while the venture gives Shenzhen-based BYD access to Daimler's technologies. Battery-powered electric vehicles may make up 3 percent of the more than 90 million cars sold globally by 2020, consulting company IHS Global Insight said.

"This gives them credibility on the world stage today," Scott Laprise, a Beijing-based analyst at CLSA Asia Pacific Markets, said of BYD. "It gives them access to technology that will help bring up their own carmaking capability."

Part-owned by Buffett's Omaha-based Berkshire Hathaway Inc., BYD entered the automobile market in 2003 and began mass production of the world's first plug-in, gasoline-electric hybrid vehicle five years later. The manufacturer, which is also owned by China's richest man, Wang Chuanfu, markets the F3 compact, China's best-selling car last year.

General Motors plans to develop an electric vehicle for India using technology developed in Detroit after scrapping a venture to make battery-powered compact models with Reva Electric Car Co.

China's government is set to announce subsidies to encourage the use of cleaner vehicles. The country is likely to account for at least 25 percent of global demand for battery-powered models in 2015, according to a forecast by J.D. Power & Associates.

"China is seeking to make itself a global leader with this technology," said Ben Asher, an analyst with J.D. Power in Bangkok. "Other countries don't have the ability to strong-arm volumes like China."

BYD plans to start selling the E6 electric car in the United States this year and in Europe next year. The company said last month that it has an agreement to deliver at least 560 E6s to a taxi operator in Shenzhen in 2010, as part of an effort to encourage individual purchases.

The potential size of the electric market will depend on external factors such as government subsidies, as "electric cars will continue to offer the end-user less perceived versatility and convenience when compared to their liquid-fueled competition," Global Insight analyst Tom De Vleesschauwer said at a Tokyo conference.