German automaker Volkswagen, whose biggest market is in China, signed a memorandum of understanding with Jianghuai Automobile Co (JAC) Wednesday to push forward negotiations on joint development of electric vehicles.
"As we aim to be at the forefront of e-mobility, Volkswagen Group is looking forward to explore all options to set up a close and mutually beneficial partnership with JAC," Matthias Mueller, chairman of the board of management of VW, said in a statement.
"We believe this cooperation would not only benefit our two organizations, but would also be of great value to our customers, a sound environment and the Chinese society in general," Mueller said.
JAC, based in the capital Hefei in China's eastern Anhui province, is one of the top sellers of electric vehicles in the country and has yet to strike a partnership with a foreign carmaker.
China requires foreign carmakers to set up businesses with local partners to help boost the technological and operational advancement of the domestic industry.
An Jin, chairman of JAC, said in a joint statement: "We look forward to a full-scope cooperation together with Volkswagen Group, focus on new energy vehicles, to provide Chinese consumers with highly cost-effective battery electric vehicle (BEV) products that promote the development of the Chinese new energy vehicle sector."
VW already has partnerships for production of passenger vehicles with China's SAIC Motor Corp and FAW Group.
A slowdown in the world's second-largest economy hurt foreign carmakers in 2015, with Chinese car sales declining for the first time in two years.
But leading German carmakers are now bullish about prospects for the world's largest auto market.
Volkswagen's deliveries in China rose 7.3 per cent to 1.392 million in the first six months of 2016, boosting global sales, the carmaker said.
Competitor Daimler saw 33-per-cent growth in Chinese sales in the period until the end of July.
Last year, Volkswagen recalled nearly 2,000 diesel vehicles in China to correct engine control software that the carmaker has admitted were designed to cheat emissions tests.