Dundee, Scotland-based Axeon Holdings (LON: AXE) announced today that it signed an agreement worth at least $33.7 million to supply lithium-ion battery packs to Allied Vehicles, based in Glasgow.

Axeon said it would supply a minimum of 1,000 battery packs to Allied Vehicles for use in Allied's Zev subsidiary, which is developing zero emission vehicles.

"This agreement represents a major step forward, expanding our customer base," said Hamish Grant, CEO of Axeon.

"It highlights our clear capability in the lithium-ion battery arena and our ability to meet the stringent design and reliability needs of automotive customers."

Allied currently focuses on the market for converting cars to taxis and to wheelchair-adapted vehicles.

Axeon said Allied's Zev unit plans to provide a 3.5 tonne rated delivery vehicle based on the Peugeot Boxer. Axeon said Zev is also looking at using Peugeot Expert body shell for a 3 tonne rated delivery vehicle, an 8 seat minibus, and a taxi.

Zev is also developing an all electric 16 seat low floor city bus.

"We are convinced that the time for electric vehicles has arrived and that we have developed the current market leader," said Gerry Facenna, chairman of Allied Vehicles and Zev.

"This agreement enables us to add the market-leading power source to those vehicles and provide our customers with the best zero-emission vehicles."

Axeon said the first delivery of batteries is scheduled for September, with volume production of the batteries starting at that point.

The company said that Zev expects to produce around 200 vehicles per year.