A123 Systems Inc AONE.O said it signed a deal with BAE Systems (BAES.L) to supply lithium ion battery packs to be used in buses as well as other commercial applications.
A123 Systems's shares rose 9 percent to $0.75 in morning trade on the Nasdaq. They have shed about 50 percent of their value after the company announced 'going concern' risk in May.
The company said it will supply the battery packs to BAE for its hybridrive series propulsion system that will be deployed on city transit buses.
A123 Systems, which developed as a start-up at the Massachusetts Institute of Technology, makes battery for Fisker Karma, the BMW hybrid 3- and 5-Series cars and GM's all-electric Chevy Spark due in 2013.
The company said in June that it has developed a new battery technology that will make electric vehicles cheaper.
(Reporting by Bijoy Koyitty in Bangalore)