Wolfsburg, Germany-based Volkswagen (OTC: VLKAY) and Tokyo's Sanyo Electric (OTC: SANYY) announced today that they would work together to develop battery technologies for hybrid electric vehicles.

The automaker and the electronics company said they plan to work on next generation lithium-ion systems.

"Our focus in future will be directed more strongly at making electrically powered automobiles alongside ones driven by more efficient combustion engines," said Martin Winterkorn, chairman of Volkswagen's board of management.

"Drivetrain electrification is the way forward if we wish to secure mobility in tomorrow's world. This will involve energy recovery."

Volkswagen said the industry needs batteries with the capacity, size, weight and cost attributes which will enable them to be used more efficiently in vehicles.

The company said lithium-ion technology, already used in communications electronics and portable computers, has the potential to satisfy the demands placed on electro-traction systems in cars.

"Since Sanyo and Volkswagen have had a strong relationship in the past with the co-development of nickel-metal hydride systems, we look forward to furthering our relationship and will focus on developing products that will benefit the environment with more effective energy storage, Volkswagen and their customers in the future," said Mitsuru Honma, VP at Sanyo.

Volkswagen said it hopes to be able to employ lithium-ion technology in its first vehicles by 2010.