Volkswagen in talks to build electric cars in China

Volkswagen said the two carmakers had signed a memorandum of understanding at its Wolfsburg headquarters to explore the possibility of a joint venture focussed on the research and development, manufacturing and sales of "new energy vehicles".

In its own statement, Anhui Jianghuai Automobile (JAC) said it expected to sign an official agreement with Volkswagen within five months.

JAC chairman An Jin said the firm was looking forward to "a full-scale cooperation" with Volkswagen "to provide Chinese consumers with highly cost-effective battery electric vehicle products".

There were no immediate details about the scope of the planned agreement.

The mooted deal comes as Beijing is seeking to develop its nascent but growing electric car industry with incentives and other government support in a bid to boost the country's environmental credentials and tackle crippling air pollution.

Some 247,000 "zero emissions cars" were sold in China last year, quadruple the number in 2014, according to the China Association of Automobile Manufacturers.

Under Chinese law, foreign companies must enter into joint ventures with domestic firms to produce vehicles in what is now the world's largest auto market.

China's leading electric car manufacturer BYD has already teamed up with Germany's Daimler, while French carmaker PSA Peugeot Citroen said earlier this year it would develop electric cars with Chinese partner Dongfeng Motors from 2019.

JAC, based in Hefei in east China's Anhui province, is a state-owned car, truck and bus maker with sales outlets across China.

It aims to bring the production and sales of new energy cars to more than 30 percent of the total by 2025, according to its website.

Like many global automakers, Volkswagen is revving up its focus on green energy vehicles with plans to launch more than 30 all-electric models within the next decade.