China South Locomotive and Rolling Stock Corp, the nation's biggest train maker, said it would form a venture with a smaller Chinese auto maker, Liaoning Shuguang Automobile Group Co, to expand the electric car business in China.

Times Electric Automobile, China South's subsidiary, will receive an investment of 78.2 million yuan (US$11.5 million) from Zelri, another unit of China South, and 177 million yuan offered by Liaoning Shuguang, China South said in a statement to the Hong Kong Stock Exchange yesterday.

Zelri will also invest about 167 million yuan in Changzhou Huanghai Automobile, an affiliate of Liaoning Shuguang that makes buses and coaches.

Times Electric Automobile is a car maker with a focus on research and development of electric cars, battery systems and other core spare parts.

China South is the latest company to show growing interest in China's new energy vehicles - a key strategy for the country's automotive industry.

Despite a lack of infrastructure and other technical barriers, China aims to have 500,000 new energy vehicles, including hybrids, electric cars and vehicle powered by alternative fuels, rolling on the streets by 2013.

A day earlier Germany's Daimler AG announced it would team up with China's BYD Automobile Co to jointly produce electric cars in China. Battery and electric car maker BYD, backed by billionaire Warren Buffett, is also cooperating with Volkswagen in hybrid cars and lithium batteries.

China South and Liaoning Shuguang also agreed to set up a sales unit with 51 percent owned by Shuguang and Zelri to take the balance.