The great battery race

March 5 2008: 2:51 PM EST

The great battery race

Dramatic developments in stored-power technology make electric cars more viable than ever.

By Alex Taylor III, senior editor

Think's lineup of battery-powered vehicles extends even to this sports utility vehicle, unveiled this week.

(Fortune) -- At a breakfast in New York last week, Jim Press, vice chairman and president of Chrysler LLC made the startling announcement that every single new Chrysler, Dodge, and Jeep is being engineered so that it can be adapted for a gas-electric hybrid powertrain. That's a huge change for technologically challenged Chrysler, which currently markets only two gas-electric hybrid vehicles - both of them equipped with technology developed by General Motors (GM, Fortune 500).

In fact, Press's statement is the most sweeping endorsement of hybrid vehicles by any manufacturer - Toyota included - and it represents a huge reversal in attitude toward hybrids. Scorned as uneconomical curiosities only a few years ago, they are now solidly in the mainstream. Whereas 13 hybrid models were for sale in 2007, there are, by one count, expected to be more than 60 available by 2011. GM announced this week that it will offer at least 16 hybrid models by 2012.

Aside from escalating gas prices and concerns about global warming, the changing attitudes toward hybrids is being driven by rapid developments in the batteries used to power them. Not long ago, batteries seemed trapped in the 19th century, a mature technology that wasn't progressing very quickly. But both established battery makers and ambitious startups are pushing battery development at once unimaginable speeds.

Replacing nickel-metal hydride batteries, the kind that are used in the Toyota Prius, are lithium-ion batteries, first designed for such applications as laptop computers and cell phones. Lithium-ion batteries provide twice the power, energy density, and cycle life of nickel metal-hydride, but less than half the weight and size, and half the cost.

Last week Mercedes Benz claimed a major breakthrough, announcing it will use lithium-ion batteries in its upcoming S-class hybrid, according to Automotive News. Due to go on sale in Europe in mid-2009 and the United States shortly thereafter, the vehicle, known as the S400 Bluetec Hybrid, is said to produce nearly 300 horsepower along with fuel economy of nearly 30 miles per gallon. Mercedes' announcement is the first of a production model hybrid by powered by lithium-ion. Mercedes' partner in the development of the batteries is Johnson Controls (JCI, Fortune 500)-Saft, and the batteries will be made in France and then assembled into modules.

Not to be outdone, GM said it will use lithium-ion batteries, developed by Hitachi, in its next generation of hybrids, due to reach the market in 2012. That's in addition to the lithium-ion batteries being developed by two other suppliers, including A123 systems, for its Chevrolet Volt plug-in hybrid.

Other automakers are in the hunt. Nissan has set up a joint venture with NEC, and Toyota is working with Matsushita. Another arrival to the lithium-ion party is Ener1, based in Fort Lauderdale, which claims to make the safest lithium-ion battery in the world because of its simple thermal management system. It also may be the only one manufactured in the United States.

Ener1 was one of more than a dozen companies screened by GM for its Volt plug-in electric car but didn't make the cut. Since then, it has signed a $70 million contract to provide batteries to Think Electric, a producer of all-electric cars based in Norway.

You may recall that Think Electric was owned for a brief time by Ford Motor Co (F, Fortune 500). during the Jacques Nasser era. Now it is independent again, and has plans to market a tiny, two-seat electric car this year. Instead of resembling a golf cart, the new version looks like the kind of minicar that wealthy grandparents buy for their grandchildren. Think believes that it can sell 10,000 of these vehicles over the next two years.

Those efforts got a boost today with the announcement that General Electric (GE, Fortune 500) is investing in both Think and A123 systems (yes, the one that's working with GM, too) to develop batteries for electric cars. Think is thinking bigger: At the Geneva auto show it showed off a larger electric vehicle - one that seats five people and is closer to the size of a sport utility vehicle. Ener1 says that it and A123 systems will split the initial orders for the small Think electric car.

Somehow, an electric sport utility vehicle seems like a step backward in the fight against global warming. But it's another sign that high-performance batteries are about to enter the mainstream.