German carmaker BMW has teamed up with Chinese SUV brand Great Wall to build an electric version of BMW’s iconic small car, the MINI, in China.

The two companies signed an agreement in Berlin on Monday at an event attended by both German Chancellor Angela Merkel and Chinese Premier Li Keqiang.

The new 50-50 partnership, called Spotlight Automotive Ltd, will also make electric vehicles under the Great Wall marque. Great Wall sells in excess of one million SUVs each year and has its headquarters in Baoding, a city to the southwest of Chinese capital Beijing.

BMW board member Klaus Fröhlich said: “Our experience as a pioneer and leader in the field of electrification, coupled with Great Wall Motor’s proven track record in efficient industrialization, enables us together to drive the growth of the largest e-mobility market in the world. With our joint approach, we can quickly scale up production and increase efficiency in the highly competitive segment of compact electric vehicles.”

Wei Jianjun, Founder and Chairman of Great Wall, said: “Great Wall Motor and the BMW Group share a commitment to promote new energy vehicles. With the combined strength of both partners, our new joint venture will accelerate the uptake of electric vehicles.”

China is currently the largest market for all BMW vehicles, with about 560,000 units going to Chinese customers in 2017. This is more than the company’s two next-largest markets – Germany and the US – combined. China is the world’s fourth-largest market for MINI-branded vehicles, with 35,000 units sold there in 2017.

The announcement follows news that Chinese battery company CATL will build a factory in Germany. These developments pave the way for a new era of partnership between China and Germany in electric car manufacturing.

Worldwide, car manufacturers are preparing new electric models specifically for the Chinese market – the biggest user of the technology – spending billions of dollars in the process. The first electric MINI will go into production next year at the company’s UK factory in Oxford.

China is creating a strong push toward electric vehicles. The Chinese government is using access to the country’s lucrative market as an incentive for overseas car manufacturers to set up operations there and team up with Chinese companies to develop batteries and other types of technology.

The government is compelling Chinese car manufacturers to produce a minimum of 10% electric vehicles, or else they must buy credits from competitors that have surpassed their quota. In addition, there is pressure to increase sales of electric vehicles even higher to meet fuel efficiency standards, which tighten every year.

The China Association of Automobile Manufacturers said that electric passenger vehicle sales increased by 82% in China last year, coming in at 468,000 units, more than double the 200,000 units sold in the US over the same period.

Similar partnerships to that between BMW and Great Wall are in the pipeline, involving other car manufacturers such as Nissan, Volkswagen and General Motors.

The new partnership comes after BMW warned the US that entering into a trade war with China and the rest of the world would cause US job losses.