Not content to leave the hybrid vehicle market to the Japanese manufacturers, Volkswagen has announced a deal that will see Sanyo produce the latest lithium-ion batteries for future VW hybrids. The new deal is in addition to the current supply agreement that sees Sanyo produce nickel-metal hydride batteries for the likes of the upcoming Audi Q7 hybrid.

When it comes to hybrid battery technology, lithium-ion represents the latest in ‘almost production ready’ battery technology. Rather than the two companies forming a joint venture (like Nissan and Toyota have with their battery suppliers), Sanyo will go it alone and invest 80 billion yen ($AU800 million) in a seven year program of plant and production expansion to ensure they have the capacity to produce 15-20,000 battery units per annum by 2015.

The scope of Sanyo’s plans are massive and obviously predicated on a future that will see the popularity of hybrid vehicles continue to increase. Plug-in technology is also on the agenda with Sanyo’s plan to begin production of a plug-in re-chargeable hybrid battery during 2011, all of which bodes well for Volkswagen who are keen to knock Toyota from their all conquering pedestal.

This massive investment is unlikely to trouble a company that currently controls the world’s single largest share of the lithium-ion PC and mobile phone market and already supplies batteries to Honda and Ford for their hybrids.