VW adds China's BYD as electric car ally

Volkswagen plans to explore the options for a partnership with China's BYD Co in the area of hybrids and electric vehicles powered by lithium-ion batteries, Europe's largest carmaker said on Monday.

Volkswagen is the first major industrial partner for BYD, a battery specialist and the fledgling maker of the F6DM plug-in hybrid that sold a 10 percent stake to Warren Buffett's Berkshire Hathaway in September for $230 million.

"Particularly for the Chinese market, potential partners such as BYD could support us in quickly expanding our activities," Ulrich Hackenberg, head of research and development at the VW brand, said in a statement.

The deal, signed last week but announced on Monday, represents the third such partnership in the area of electric vehicles for Volkswagen, which already has signed letters of intent with Sanyo Electric Co in May last year and Toshiba Corp this February.

Carmakers are racing to develop next-generation lithium-ion batteries capable of making electric vehicles a viable alternative to cars equipped with combustion engines.

The environmental benefits depend on whether the power is generated from renewable sources like solar energy. Nevertheless electric cars are considered to be the best near term solution to carbon-free driving.

Last week German rival car and truckmaker Daimler announced it had bought nearly 10 percent of Tesla Motors, expanding on an existing partnership with the electric sports car maker.