Fires in vehicles and the high price of energy storage technology have hampered the market for batteries powering electric vehicles.

But that is not stopping Tianneng Group, Chinese largest battery manufacturer, from investing in a market expected to be worth more than 200 billion yuan within a few years.

Zhang Tianren, chairman of Tianneng Group, the first battery company listed on the Hong Kong Stock exchange in 2007, is betting that more Chinese will be flocking to low-speed electric vehicles and using its batteries for driving in small cities and the rural-urban fringe.

Tianneng, with annual sales of 38 billion yuan ($5.35 billion) in 2012, has made the lead-acid and lithium ion batteries a target for growth.

"People living in third - or even fourth-tier cities and those in rural areas generally can't afford a regular car, but they still need to commute to work or take their children to school, so what should they do?" Zhang said. "Low-speed vehicles will be their solution."

With a price range of 30,000 to 50,000 yuan, low-speed electric vehicles have a strong presence in China, although most of them are produced by private carmakers without a government license. As a result, they are not recognized as new-energy cars.

China, the world's largest energy consumer, is embracing the electric vehicle industry, which could help it not only reduce fossil fuel consumption but also to build a car industry that could leapfrog its global competitors in this emerging sector.

The Ministry of Finance announced in September that it will extend a program of subsidies for buyers of electric-powered vehicles after the current subsidy regime, part of an effort to combat pollution in cities, expires in 2015.

The subsidies were designed to help China meet a goal of putting a half-million new-energy vehicles on the road by 2015 and 5 million by 2020.

But currently there are only 20,000 to 30,000 electric cars hitting the road, far from the government's target.

"We have been developing the new-energy vehicle sector for a long time, but we don't even have a clear definition of a new-energy vehicle, not to mention the ability to reach the target by 2015," Zhang said. "The reason for that is automakers are relying too much on government subsidies."

Zhang said the government should launch regulations on the technical standards of the industry to allow more private carmakers to participate in the electric vehicle market and "grow in the sunlight".

Each major automaker is likely to have an electric vehicle in its portfolio by the end of the decade with batteries at the core of those vehicles playing an important role for advancement, analysts said.

The soaring demand fueled by China's resolution to tackle air problems has also drawn other global rivals to invest in a market where the payback may take time.

South Korea's Samsung SDI said in January that it will form a joint venture in China to spend $600 million over the next five years on building an electric-car battery plant in Xi'an, Shaanxi province, which is expected to be the country's largest battery production base and home to other electric-car battery-related businesses.

The factory, which will be put into production next year, could be used to serve its current customer BMW as well as carmakers such as Volkswagen AG that are rushing into electric cars in China, analysts said.

Rival LG Chem, which currently supplies electric-car batteries for General Motors Co's Volt and Renault cars, is also planning to set up an electric vehicle battery plant in China, hoping to double the number of its clients to 20 in the near future, according to Reuters.

Although multinational companies have more advanced technology, the Chinese battery companies have a competitive edge in winning them over with their prices, Zhang said.

"What deters the development of electric vehicles is the expensive cost of advanced battery technologies. With low production costs, Chinese companies have more advantages in pricing," he said. "Besides, we are also better at building connections and networks for service."

lvchang@chinadaily.com.cn