Daimler and BYD plan to invest 600 million Yuan ($88 million, €71 million) in the joint venture called Shenzhen BYD Daimler New Technology Ltd.
The two companies had signed a memorandum of understanding on the venture in March.
Backed by Warren Buffett, BYD began mass production of the F3DM – world’s first plug-in hybrid car in 2008. Chinese company plans to start selling the E6 electric car in the U.S. this year and in Europe next year.
Daimler’s electric-car strategy includes large-scale production of an electric version of its Smart ForTwo starting in 2012. The company began assembling about 1,000 units of the urban two-seater in November 2009. Daimler will make lithium-ion automotive power packs in a joint venture set up in late 2008 with Evonik Industries AG, Germany’s largest specialty-chemicals maker.