Shares of A123 Systems Inc. rose Thursday after the battery maker said it is planning a Chinese joint venture with General Motors Co. partner SAIC Motor Corp. to supply batteries for electric and hybrid vehicles.
SAIC is one of China's biggest automakers. China is the world's biggest auto market.
The new venture, called Shanghai Advanced Traction Battery Systems Co., will be the main supplier for all hybrid and pure electric vehicles made by SAIC Motor and its subsidiaries. SAIC, owned by the Chinese government, will hold a 51 percent stake, said A123, which is based in Watertown, Mass.
The joint venture will supply batteries for SAIC's planned plug-in hybrid vehicle.
The announcement "solidifies our belief that A123 is in (a) strong position to be awarded additional contracts," said Deutsche Bank analyst Dan Galves in a note to clients.
Thanks to SAIC's joint venture with GM, the new partnership could also be in a strong position to supply batteries for potential GM vehicles, he said.
Galves said the Chinese government's "rhetoric" has been "positive" on electronic and hybrid vehicles in China, and he believes the sector's growth will be "very meaningful." A123's "partnership with SAIC is quite favorable for the long term."
A123 shares rose $1.60, or 8.7 percent, to $19.92 in afternoon trading amid a decline in broader markets.