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Mercedes-Benz is investing in Chinese developer and supplier of lithium-ion batteries, Farasis Energy, in accordance with the German automaker's goal to become carbon-neutral automotive company.

The renowned luxury car manufacturer has invested a purported 13 million euros into Farasis, giving parent company Daimler the option to nominate a representative for a seat on the supervisory board of the battery cell manufacturer.

Present contracts with Farasis have been amended and include, in addition to technical and commercial contractual components, expanded legal and sustainability requirements.

This gives Farasis, under certain technological and commercial conditions, the option to join projects for next generation Mercedes-Benz EQ, the German carmakers series of battery electric vehicles.

This strategic partnership also represents an important step towards Mercedes-Benz's "Ambition 2039" C02-neutral goal.

In accordance with Daimler's ramping up of production and development towards its "Electric First" strategy, Mercedes expects to yield five pure electric vehicles and 20 plug-in hybrids by the end of 2020 in addition to its existing pure EV Mercedes-Benz EQC.

This new contract will provide a secure supply of battery cells for this new electrification strategy, with Farasis gaining a secure source of production for its planned construction of production capacity.

As Farasis operates only one lithium ion battery cell plant in China, and Daimler has been the primary consumer of Farasis batteries outside of its home country, this deal makes sense for Daimler.

Both for its domestic China strategy-to expand EV production and further ingrain Farasis' battery cell output into Daimler's vehicle production-and for longer term EV production in Europe.

The most important move, perhaps, is the ambitious plan of localization. With the capability of a local battery production facility, it would significantly determine the success of the company's electrification strategy.

To meet Mercedes-Benz's growing needs and ambitious plans in Europe, Farasis intends to build a battery cell plant in Bitterfeld-Wolfen, Germany, designed as a CO2-neutral factory from the ground up.

"We are very pleased to further expand partnership with Farasis in taking a decisive step within the implementation of our electric strategy 'Electric First'. By strategically expanding our business relationship, we are pushing the electrification of our model portfolio ahead," said Markus Schäfer, member of the Daimler and Mercedes-Benz board of management.

"With this agreement, we contribute our expertise in the field of battery cell development. At the same time, we are providing a boost for Farasis's new plant and promoting the sustainable development of a key technology and its establishment in Germany. We share with our partner the common vision of a more sustainable world through CO2-neutral mobility," he added.

These key moves are in line with the goal of Daimler's "Ambition 2039" targets, a fundamental transformation for the company.

Under this plan, Mercedes-Benz aims to have a carbon-neutral new passenger car fleet by 2039, with an intermediate goal of having plug-in hybrids or all-electric vehicles to make up more than 50% of its car sales by 2030.

Daimler AG

Due to COVID-19, Mercedes-Benz's Markus Schäfer and Farasis Energy founder and CEO Yu Wang met digitally to conclude the contract between the companies on July 3.

Mercedes-Benz and Farasis had already agreed on a sustainability partnership in the summer of 2019 with results of its first battery cells from renewables.

Daimler Greater China's investment in the battery cell manufacturer is actively driving forward the development of a key technology for electric mobility and its industrialization.

Including the plant being planned in eastern Germany, an additional plant in the U.S. will soon follow, aligning with the future strategy of purchasing where production takes places.

"By taking a stake in a Chinese battery cell manufacturer for the first time, we will further leverage the potential of advanced technology partners in the market, enabling us to pursue our electric strategy globally," explained Hubertus Troska, a Daimler board member responsible for Greater China. "In the future, we will continue to strengthen our activities in research and development, production and purchasing in China."