Chongqing Changan Automobile has signed a strategic agreement with LG Chem to jointly develop lithium-ion batteries for new energy vehicles,, citing Chongqing Commercial Daily, reported.

LG Chem will supply lithium-ion batteries to Changan for its new energy vehicles but both sides were still discussing whether to establish a joint venture plant in Chongqing, a major city in southern China.

The cooperation could take various forms. If LG decides to set up a plant in Liangjiang Xinqu, Chongqing, then it will simply be the supplier of lithium-ion batteries for Changan. However, if the two sides are going to build a new plant together, then Changan will formally enter the lithium-ion battery industry.

With ample experience in development of lithium-ion batteries for hybrid vehicles and all-electric vehicles, LG Chem started delivering batteries to Hyundai Motor and affiliate Kia Motors in 2009. It has also signed supply contracts with General Motors and Eaton, CEO Kim Bahn Suk said earlier.

Changan's new energy vehicle sales account for more than 50% of China's total, taking the lead in the national trial running programme. By the end of 2010, the company had developed and launched eight new energy models, including the Changan BenBen Love, Benen Mini Electric, Zhixiang HEV (hybrid-electric vehicle), Jiexun HEV (a mild hybrid car) and Zhixiang fuel cell SUV. A B-class pure electric model will roll off the production line at Changan's new facility in Beijing this year.