Honda Motors and Contemporary Amperex Technology will work together to develop electric vehicles. The Japanese car maker sees electric vehicle as crucial for future growth and that is why it is partnering with the largest battery maker in the world.

New electric cars would be the primary users of the batteries and the related technology that would be developed by the joint project and such vehicles is planned to be launched in the Chinese market and at other places sometime in the first half of 2020.

The effort reflects a growing trend toward using Chinese suppliers for important components, amid a global shift to electric vehicles.

Honda’s Fit minivehicle would form the basis of the new vehicle to be developed by the two companies. The target of the project is the development of an electric car that is affordable and would cost a little over 2 million yen ($18,000) and will have a small battery and a comparatively lower range of about 300km of travel on a single charge.

Honda aims to make this segment its top selling segment with a target of to sell more than 100,000 of the cars a year.

batteries made by CATL will also be used in the Sylphy Zero Emission which is an electric car that is being developed by Nissan Motors and planned to be launched in the Chinese market in 2018. CATI which has benefitted from such deals and therefore it can lead to more such orders as more electric vehicles hit the streets.

Battery specifications, production technology and electric vehicle performance testing are some of the areas that Honda and CATL want to work together in. The automaker also hopes to work with the Chinese company on future electric cars.

Japanese battery makers Panasonic and GS Yuasa are the firms that Honda has partnered with to currently produce its range of minicar and minivan that includes gasoline hybrid vehicles. Honda has said that those relationships are intended to be maintained by it.

By 2023, the Japanese auto company has plans to increase its portfolio of electric and plug-in hybrid vehicles to about 65% of the total sales.

CATL’s rapid growth is being fueled by the campaign of Beijing to promote electric vehicles. According to Tokyo-based Techno Systems Research, in terms of shipment, the company is anticipated to become the largest company in the global automotive battery market in 2018 with 19% market share and will overtake Panasonic’s 15.5%.

By the end of 2020, the capacity of the Chinese company is being planned to be doubled over 50 gigawatt-hours.

Despite being the early birds in the automotive battery technology segment, it has not been possible for Panasonic, South Korea’s LG Chem and Samsung DSI to enter China which is the fastest growing electric car market. Electric cars equipped with batteries the are made by domestic manufacturers in China are subsidized by the Chinese government which has created roadblocks for foreign manufacturers in entering the Chinese market. And hence companies such as CATL and BYD have gained an edge in the market.

(Adapted from Asia.Nikkei.com)