William Boston & Joe White:

Daimler AG the German automotive group, Sunday unveiled plans to build an all-electric vehicle with its Chinese partner BYD, 002594.SZ +1.27% a further sign foreign operators are under pressure to meet demands by the Chinese government for a massive increase in electric cars to fight air pollution.

The Chinese government has a target of putting 500,000 electric or plug-in hybrid cars on the road by 2015, but the industry would have to sell about 450,000 plug-in cars during the next two years to achieve that target. The shortfall is putting more pressure on auto makers to step up investments in electrified vehicles—such as the Daimler-BYD cars.

Thomas Weber, Daimler’s board member in charge of research and development, told reporters that this new model is “undoubtedly one key pillar of our electric vehicle strategy for China.”

The new electric car, called the Denza, is entitled to subsidies from both the central and local governments in China, Daimler officials said. The car was developed by Shenzen BYD Daimler New Technology Co. Ltd, the Daimler-BYD joint venture that was formed in 2010. The five-seater Denza is expected to go on sale in China in September, and is priced at 369,000 renminbi, or about $60,000. With government subsidies, Daimler said the price for the consumer could be reduced by 120,000 renminbi.