US lithium ion battery maker firm A123 Systems has agreed a joint venture with Chinese automaker SAIC to develop, manufacture and sell complete vehicle traction battery systems for use in hybrid electric and pure electric passenger vehicles and heavy duty truck and bus applications in China, the largest and fastest growing automotive market in the world.

The new venture, called Shanghai Advanced Traction Battery Systems (ATBS) develop business in the entire Chinese transportation market and will also be the preferential supplier of complete energy storage systems for all hybrid electric and pure electric vehicles manufactured by SAIC Motor and its wholly-owned subsidiaries. A123 Systems will supply the advanced automotive battery cells and work with SAIC Motor to design and develop the integrated battery systems for ATBS.

The venture’s ownership will be held 51% by SAIC Motor and 49% by A123 Systems, with the management duties of the venture being shared equally between the parties.

ATBS has been awarded a contract to supply battery systems for SAIC Motor’s plug-in hybrid vehicle programme.

SAIC Motor is also developing a broad range of ‘new energy’ vehicles. It has already announced plans for a hybrid Roewe 750 sedan and a plug-in hybrid version of the 550, which could cut fuel consumption by 20% and 50% respectively, in addition to plans for introducing electric vehicles on the market in 2012. The Roewe 550 and 750 will use A123 battery cells.

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“We are excited to be partnering with an industry leader such as SAIC Motor to pursue the expanding Chinese market for advanced lithium ion battery technology,” said David Vieau, chief executive officer of A123 Systems.