In a partnership venture announced on May 28, Volkswagen and Sanyo Electric will collaborate on the development of lithium-ion batteries, a key component in the competition to develop the next generation of hybrid gasoline-electric vehicles.

Sanyo currently holds the largest market share in lithium-ion batteries for use in mobile phones and personal computers and is prepared to spend $769 million over the coming seven years to bring lithium-ion automotive batteries into mass production.

Martin Winterkorn, CEO of Volkswagen Group said, "Our focus in the future will be directed more strongly at making electrically powered automobiles alongside ones driven by more efficient combustion engines. This cooperation is an important step for us."

Currently Volkswagen is working with Sanyo on the development of nickel-metal hydrid systems and Sanyo has worked with both Ford and Honda on hybrid vehicle batteries. Competitors Toyota, Nissan, and Mitsubishi are working with Matsushita Electric Industrial, the EC group, and GS Yuasa respectively on lithium-ion battery tech.

The batteries produced by the Sanyo-Volkswagen collaboration will begin in the Sanyo factory in Tokushima but will move to a new location in April 2010. The projected future demand for the batteries is between 15,000 and 20,000 units per year. The work of the two companies will also evolve to batteries for plug-in hybrids by 2011.