The municipal government of Hefei, capital of East China's Anhui province, and JAC Motors, a local carmaker, signed an agreement with Volkswagen in Wolfsburg, Germany in mid-June, vowing to set up a joint venture to make electric vehicles.
Under the agreement, the new company will go into operation in 2018.
JAC and VW will work together to develop new-energy auto parts and expand their reach into vehicle connectivity technology and automotive data services.
Construction on a new plant and a research and development center will be accelerated, the document said, adding that a platform for used cars is set to be built.
Matthias Mueller, CEO of Volkswagen Group, called the new joint venture a milestone in its electric offensive in China. He said VW will form great partnership with JAC and help it with its transition from a traditional automaker to a provider of sustainable traffic solutions.
JAC Motors' president, An Jin, said the company will cooperate with VW in speeding up the construction and production process.
The state-owned carmaker sold about 640,000 passenger cars, commercial vehicles and chassis last year, including 18,000 new energy vehicles.