Italian vehicle group Fiat SpA's (FIA.MI) Magneti Marelli unit has signed an agreement with Italy's FAAM SpA for development, production and sale of lithium batteries, Fiat said on Monday.

The electronics and components unit sees joint development of the batteries for electric propulsion of cars, motorbikes, buses and other vehicles, leading to product sales in the second half of 2010, it said in a statement.

A Milan-based analyst, who asked not to be named, said Fiat had filled its shortfall in electric vehicle technology via its recent alliance with the U.S. vehicle manufacturer Chrysler, which is further ahead of Fiat in this area.

FAAM is based in the Marche region of eastern Italy and apart from Italy has plants in Uruguay for the Mercosur region and in China for the Asian market.

A company spokeswoman said FAAM's 2008 sales were 80 million euros ($114 million).

(Writing by Nigel Tutt; Editing by Dan Lalor)

($1 = 0.6998 euro)

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