BYD and Mercedes parent company Daimler Group formally denied rumors about a "break up" following a report that claimed Mercedes-Benz had switched to an alternate battery supplier because of mechanical failures from batteries produced by the Chinese manufacturer.

Rechargeable electric car battery maker BYD, established in 2003, is part of Shenzhen-based BYD Co. Ltd.

The rumor claimed Mercedes was seeking an alternate battery supplier due to problems with the spontaneous combustion of BYD electric car batteries. The report also said Mercedes and American auto firm Tesla were cooperating on electric car research, setting off speculation that the German automaker might be switching suppliers. Tesla is also a major producer of batteries and motor technology.

In a press conference yesterday, a Daimler China PR representative denied rumors of a split with BYD as a Mercedes battery supplier. BYD also issued a statement of cooperation to the Shanghai Securities News saying the report was untrue.

Since a May incident where a BYD-produced electric taxi exploded in Shenzhen after being struck by another car at high speed, BYD has faced a lack of confidence in the market. Its share price declined on the first trading day after news of the explosion broke, falling from 24 yuan (US$3.8) to around 17 yuan, the largest single-day decline in the company's history.

BYD's stock traded heavily from July 2 to July 13, with sales of the stock surpassing 400 million yuan five times this month. The activity has been attributed to recent selloffs of the stock by BYD executives.