TOKYO (Reuters) – Toyota Motor Corp <7203.T> and Panasonic Corp <6752.T> are set to launch a joint venture next year to produce batteries for electric vehicles (EV) in an effort to compete with Chinese rivals, a source familiar with the matter said.

The joint venture, to be owned 51 percent by Toyota and the rest by Panasonic, could also provide batteries to Toyota’s EV technology partners Mazda Corp <7261.T> and Subaru Corp <7270.T>, the source said on Sunday.

The source declined to be identified because the talks on the joint venture are private.

A joint venture would build on the agreement that the pair announced in late 2017 on joint development of batteries with higher energy density in a prismatic cell arrangement.

Toyota and Panasonic each said the plan to set up a joint venture, first reported by the Nikkei business daily on Sunday, was not what they have publicly announced.

A Toyota spokesman said the two companies have been working on the battery partnership announced in 2017. Panasonic made the same comment in a statement.

Under a planned joint venture, Panasonic would shift most of its prismatic battery-related equipment and facilities in Japan and China to the joint venture, while those producing batteries for U.S. EV maker Tesla Inc <TSLA.O> will remain under the company, the source said.

Panasonic already makes prismatic batteries for Toyota, whereas for Tesla, it makes cylindrical batteries of a type similar to those used in laptops.

The two companies may announce the joint venture plan as early as this week, according to the source.

The battery joint venture will help Toyota achieve an annual sales target of around 1 million zero-emission battery EVs and fuel-cell vehicles (FCVs) by 2030.

It will also give Panasonic cost and scale advantages in battery production at a time when China’s Contemporary Amperex Technology has grown to be on par with the long-time industry leader on the back of the rapidly growing home market.

(Reporting by Makiko Yamazaki and Maki Shiraki; Additional reporting by Takashi Umekawa; Editing by Michael Perry)