Such a tie-up would pit them against local rivals such as Warren Buffett-backed BYD Co., which has ambitious plans to produce lithium ion batteries and electric cars.

"We are in the final stage (of talks)," Roland Ehniss, a Bosch executive vice president, told Reuters on the sidelines of the Global Automobile Forum in the southwestern city of Chengdu. He said he hoped the venture could start production by 2012.

Initial production would have to exceed 20,000 units a year for the project to be commercially viable, Ehniss said. The participants in the talks still are trying to decide whether to form a two- or three-party joint venture.

"We have talked to a lot of customers, local carmakers, including SAIC and some foreign carmakers," Ehniss said. "We are talking with nearly every company who is interested to get a battery with high power density and hopefully competitive costs."

The German auto parts giant set up a 50-50 joint venture with Samsung SDI in 2008. The partnership will launch hybrid battery production this year, with a minimum investment of $500 million for four to five years.

Bosch already has a parts-making joint venture with SAIC, China's largest automaker, in which the German firm has a 51 percent stake.

In the proposed battery joint venture, Bosch and Samsung might contribute some of their existing joint venture's production assets and R&D to a new partnership with SAIC.

"We (will) bring the battery company to China and integrate it into our joint venture with our Chinese partner," Ehniss said. He said the companies were discussing the venture's shareholding structure.