Volkswagen says it has signed a "memorandum of understanding" with Chinese carmaker BYD to explore "options for partnership in the area of hybrids and electric vehicles powered by lithium batteries."
Warren Buffett's Berkshire Hathaway bought a 10 percent stake in BYD last fall, and Buffett has been personally promoting the company's efforts. (See last month's WBW post Fortune Puts Warren Buffett In "Car of the Future" Driver's Seat.")
A Volkswagen executive is quoted in a company statement as saying, "Volkswagen will consistently expand its successful ‘BlueMotionTechnologies’. Hybrids and electric vehicles will play an increasingly important role, of course. Particularly for the Chinese market, potential partners such as BYD could support us in quickly expanding our activities."
Dow Jones notes that many of the world's biggest automakers are scrambling to "secure supplies of batteries for alternative vehicles" and reports that BYD is also talking to Ford Motor about "similar arrangements."
"One major obstacle in the race is that there's not enough capacity in the industry to produce lithium-ion batteries -- a factor that is pushing auto makers like Volkswagen to team up with multiple lithium-ion battery suppliers. Aside from BYD, Volkswagen already has signed letters of intent with Japan's Sanyo Electric Co. and Toshiba Corp., another Japanese battery producer."
BYD says it has developed new technology that makes its lithium-ion batteries safer and less expensive that other similar products.
