FCA Fiat Chrysler Automobiles N.V. on Friday confirmed that it is in discussions with Hon Hai Precision Ind. Co., Ltd. (Foxconn) regarding the potential creation of an equal joint venture to develop and manufacture in China new generation battery electric vehicles and engage in the IoV (Internet of Vehicles) business.

The proposed cooperation, initially focused on the Chinese market, would enable the parties to bring together the capabilities of two established global leaders across the spectrum of automobile design, engineering and manufacturing and mobile software technology to focus on the growing battery electric vehicle market.

FCA said that the parties are in the process of signing a preliminary agreement which will govern further discussions aimed at reaching final binding agreements in the next few months.

Fiat Chrysler is in the process of merging with France's PSA Peugeot, which is 12% owned by Chinese company Dongfeng Motor Co. Both Fiat Chrysler and Peugeot have lagged in developing electric powertrains and also have been struggling to increase sales in China, the world's biggest auto market.

Companies including General Motors Co. and Toyota Motor Co. have electric vehicle joint ventures with Chinese partners to take advantage of their experience at making low-cost vehicles.

The Chinese government has a credit-based system that encourages automaker to sell electric vehicles, leading to a proliferation of brands.

Daimler AG’s Mercedes Benz has electric vehicle joint ventures with both BYD Auto, one of the biggest global makers of battery-powered vehicles, and rival Geely Holding, which is best known abroad as the owner of Sweden’s Volvo Cars. Geely also has two separate electric brands, Geometry and Volvo’s Polestar.

Beyond its stake in PSA Peugeot, Dongfeng also has joint ventures with Nissan Motor Co., Kia Motor Co. and Groupe Renault, all of whose product lineups include electric models.