Volkswagen and Chinese automaker BYD [Build Your Dreams] have signed a memorandum of understanding to explore the options for partnership in the area of hybrids and electric vehicles powered by lithium batteries, VW said in a statement.

The Chinese automaker recently visited VW's Elektrotraktion Technology Centre in Isenbüttel and test tracks in Wolfsburg and tried a variety of vehicles such as the Golf twinDrive and a prototype electric vehicle.

"Volkswagen will consistently expand its successful 'BlueMotionTechnologies'. Hybrids and electric vehicles will play an increasingly important role, of course. Particularly for the Chinese market, potential partners such as BYD could support us in quickly expanding our activities," said VW technical development chief Ulrich Hackenberg.

Volkswagen is the first major industrial partner for BYD, a battery specialist and the fledgling maker of the F6DM plug-in hybrid which, last September, sold a 10% stake to Warren Buffett's Berkshire Hathaway for US$230m, Reuters reported.

The deal is the third such partnership in the area of electric vehicles for VW, which already has signed letters of intent with Sanyo Electric in May last year and Toshiba this February, the news agency noted.

Daimler last week said it had bought nearly 10% of Tesla Motors, expanding on its existing partnership with the electric sports carmaker.

Chinese on a Charge