Together with the Chinese group Build Your Dreams (BYD) Daimler said it had agreed to develop an electric car for the Chinese market.
A new brand would be created for the vehicle and the construction of a Chinese technology center was included in the deal.
Daimler is to bring its expertise in electric cars to the venture, while BYD would add its battery technology to the company.
"Electric vehicles are especially well-suited for urban driving. With its many metropolitan areas, China has the potential to be among the worlds largest markets for zero-emission vehicles," the statement quoted Daimler chairman Dieter Zetsche and BYD chairman Wang Chuanfu as saying.
Daimler is relatively new to the field of low-emissions vehicles, but the maker of Mercedes Benz is trying to catch up with the launch this year of electric versions of its Smart city car and small Class A series.
In late 2010, BYD plans to introduce its e6 electric vehicle in North America.
U.S. billionaire Warren Buffett owns 10% of BYD.
Copyright Agence France-Presse, 2010
