German companies are partnering with Chinese battery makers to gain a better foothold in China and other markets.

Mercedes-Benz has chosen Contemporary Amperex Technology Co Ltd as its major battery supplier. CATL is a global leader in the development and production of lithiumion batteries. In 2019, its battery production capacity reached 40.25 gigawatt-hours.

"Working with CATL will see us accelerate our transformation toward carbon-neutrality," said Markus Schaefer, a board member of Daimler AG and its subsidiary Mercedes-Benz.

The two companies have started working on battery products that will be used in vehicles within the next few years.

Daimler announced in July that it is acquiring a stake of around 3 percent in Chinese battery cell maker Farasis Energy.

The carmaker did not give an exact investment figure for the equity, but said it is investing "multimillions" of euros in Farasis' initial public offering on China's Nasdaq-like STAR board.

A stake in a Chinese battery cell maker will enable the company to further leverage the potential of advanced technology partners to pursue its global electrification strategy, said Hubertus Troska, a board member of Daimler AG responsible for its China business.

"China is the world's largest electric car market with tremendous potential for further development. We are working with strong and trusted partners in China, not only to enhance our local footprint but also to strengthen our competitiveness worldwide," Troska said.

China overtook the United States in 2015 as the largest market for electric cars, plug-in hybrids and fuel cell vehicles, and has since held the lead.

Last year, sales of such vehicles in China totaled 1.2 million, according to the China Association of Automobile Manufacturers.

Affected by COVID-19, these sales could fall to 1.1 million this year, said the association's vice-chief engineer Xu Haidong.

Volkswagen AG is confident in the sector's long-term potential. "China is determined to make new energy vehicles a success and Volkswagen is determined to make it a success, and I am confident it will happen," said Volkswagen Group China CEO Stephan Woellenstein.

Despite the estimated fall in such vehicle sales this year, the carmaker said it will not alter its sales goal of delivering 1.5 million vehicles in China by 2025.

The German carmaker is in the process of acquiring a 26 percent share in China's No 3 battery maker Gotion.

The 1 billion euros ($1.19 billion) deal, expected to be completed later this year, will make the German car giant Gotion's largest shareholder.

Herbert Diess, CEO of Volkswagen AG, said the partnership is an opportunity for Volkswagen to achieve deeper know-how in the field of batteries.

Gotion has a number of projects over the entire battery value chain from sourcing, development and production to recycling.

Volkswagen said Gotion will supply batteries to its three joint ventures in the country, two of which are making vehicles on Volkswagen's electric platform.

Two models built on the platform will launch before Spring Festival, said the company.