BEIJING, Mar. 3 -- Chinese electric car maker BYD Co Ltd<1211> and Germany's Daimler AG yesterday signed a memorandum of understanding to develop electric vehicles for China, the world's largest auto market, the companies said in a statement.

"China has the potential to be among the world's largest markets for zero-emission vehicles," according to the statement.

Pursuant to the MOU, the two companies will develop a new electric car that meets Chinese market's requirements and will jointly create a new brand for the car. They also agreed to set up a common technology center in China to develop, design and test this electric vehicle.

"With this technology partnership, we have created a win-win business model with complementary competencies," said Wang Chuanfu, BYD's chairman and president.

Shenzhen-based BYD, one of the fastest-growing Chinese auto makers, aims to sell 800,000 units in 2010.