Mitsubishi Motors Corp. has agreed to make 100,000 electric vehicles for French carmaker PSA/Peugeot Citroen starting this year as Mitsubishi seeks to boost volume and cut costs.
PSA originally agreed to buy 25,000 electric cars from Mitsubishi but doubled the order late last year and then doubled it again this month.
The supply contract for the battery-powered Citroen C-Zero and Peugeot iOn runs until 2015.
Carmakers around the world are competing fiercely to bring electric vehicles to the market as regulation caps carbon dioxide emissions from gasoline and diesel engines and customers look to buy more green products.
Under the agreement announced last week Mitsubishi will start producing the zero-emissions vehicles for PSA in October, and the cars will be sold in Europe by year end.
PSA's brand boss, Jean-Marc Gales, told Automotive News Europe at the Geneva auto show this month that PSA will be the first mass-market European automaker to sell electric cars in Europe.
Small Norwegian electric carmaker Think has been selling its City minicar in Europe since December 2008.
The PSA models are based on Mitsubishi's i-MiEV electric car, which already is on sale to fleets in Japan and goes on sale to private buyers there next month. European sales of the four-seat i-MiEV start late this year. Sales begin in the United States in mid-2011.
Nissan Motor Co. has promised to start European sales of its Leaf electric car this year.
PSA aims to sell 25,000 of the electric cars annually, with half going to each of its Peugeot and Citroen brands.
Mitsubishi plans to produce 18,000 electric cars in its 2011 fiscal year. By the fiscal year ending March 31, 2013, Mitsubishi expects to make 30,000 i-MiEVs a year. Total electric vehicle output will reach nearly 55,000 after adding PSA's 25,000 units.
Mitsubishi will build the four-seat electric cars at its plant in Mizushima, Japan. The cars for PSA will get different body styling and interiors and will have different handling and suspension characteristics.
Boosting volume will help bring down costs in electric vehicles. The cars need lithium ion batteries, which are light and powerful but expensive. Mitsubishi began taking retail orders for the i-MiEV last summer for the April launch in Japan. So far it has 2,000 takers.
Mitsubishi and PSA had long been in talks about expanding their joint businesses and possibly forming a capital alliance. But at this year's Geneva auto show, the two companies released a statement saying a cross-shareholding was not realistic now.
But the companies reiterated a desire to expand operational ties.
Douglas A. Bolduc contributed to this report