Chinese car parts giant Wanxiang Group moved Wednesday to take control of A123 Systems, a pioneering but struggling maker of electric car batteries that had gained strong backing from the US government.
A123 said Wanxiang agreed to invest up to $450 million in it under a non-binding memorandum of understanding, aiming to "create the capital structure necessary for the company to continue growing its core businesses."
"Alignment with Wanxiang is also expected to substantially strengthen A123's access to the growing vehicle electrification and grid-scale energy storage markets in China."
A123 had garnered some $249 million in US government grants to develop its lithium iron phosphate batteries, with plans to supply different buyers including the luxury electric car maker Fisker.
But the company has continued to bleed red ink, reporting Wednesday that it had lost $208 million in the first half of the year.
The deal with Wanxiang "is the first step toward solidifying a strategic agreement that we believe would remove the uncertainty regarding A123's financial situation," said David Vieau, A123's chief executive.
"A substantial capital investment from Wanxiang would not only provide financial stability to A123 as we continue to grow, but it would also align us with a large, successful global brand in the automotive and cleantech industries."
In 2011 Wanxiang tied up with Ener1, another US lithium iron phosphate battery maker backed by the US government, with aims to produce their batteries in China.
But Ener1 filed for bankruptcy in February this year.