Panasonic and Beijing Automotive Group plan to launch a factory for key electric vehicle parts.
The factory is to be in the Chinese city of Tianjin.
The Japanese electronics conglomerate and China’s leading automaker, also known as BAIC, are to put hundreds of millions of dollars into the joint project.
The factory is to support BAIC as it expands its electric vehicle production to 400,000 units by 2020.
The Chinese government has been advocating for electric vehicles as a way to cut down on air pollutants. Its policy efforts last year helped China overtake the U.S. as the world’s largest electric car market.
The project will be a big boost to Panasonic’s battery and other auto-related divisions.
The electronics giant now considers car batteries to be a key revenue source. It expects its car-related businesses to make 2 trillion yen ($18.7 billion) in sales by the year through March 2019, up from 1.3 trillion yen for the 12 months through this past March.
One way its expects to reach its goal is to leverage China’s electric vehicle market. Next year, it plans to launch a plant to turn out lithium-ion batteries for cars in the city of Dalian.
Panasonic President Hirokazu Tsuga in May visited China and agreed with BAIC executives to establish a joint venture by the end of this year. Panasonic’s China unit will hold a 46% stake; the rest will be owned by two BAIC autoparts makers.
The partnership initially is to focus on mass production of electric compressors, a key part in the air conditioners of electric cars. These compressors have to keep things cool by sipping only a little power from a car’s rechargeable battery.
According to the China Association of Automobile Manufacturers, 330,000 electric and plug-in hybrid cars were sold in China in 2015. That is quadruple the number from 2014 and makes China the No. 1 market for these types of cars.
Experts expect the market to keep growing for the time being.