Sept. 4 (Bloomberg) -- GS Yuasa Corp., the best performer on Japan's Nikkei 225 Stock Average this year, may build a plant overseas making lithium-ion batteries to meet demand for electric vehicles, President Makoto Yoda said.

``Our eyes are firmly on the domestic market, but we think demand in Europe and the U.S. will climb going forward,'' Yoda said in an interview with Bloomberg Television in Tokyo broadcast today. ``We have to choose our next factory's location based on growth in the given market.''

GS Yuasa and NEC Corp. are among companies expanding into lithium-ion batteries for cars to spur sales growth as stricter rules on pollution and higher gasoline prices raise demand for fuel-efficient vehicles. Kyoto, Japan-based GS Yuasa, also the world's third-largest maker of lead-based batteries, will focus on lithium-ion batteries to bolster profitability, Yoda said.

Lithium-ion batteries will help raise the operating profit margin, or the percentage of sales left after subtracting the cost of goods sold and administrative expenses, to more than 10 percent in several years, Yoda said. The company has forecast 3.8 percent margin for the fiscal year ending March 2009.

The battery maker's overall revenue may climb to as much as 500 billion yen ($4.6 billion) in a few years, Yoda said, without being more specific. The company, which gets about a quarter of sales from batteries for cars, in May forecast 340 billion yen in revenue this fiscal year.

GS Yuasa fell 5.4 percent to close at 528 yen on the Tokyo Stock Exchange. The stock has more than doubled this year, compared with an 18 percent decline for the Nikkei index.

Carmaker Ventures

Mitsubishi Motors Corp., Mitsubishi Corp. and GS Yuasa, which set up a lithium-ion battery venture in December 2007, said in August they bought a factory in Japan to make the devices. All batteries from the factory, scheduled to start operating early next fiscal year, will be used in Mitsubishi Motors' i MiEV electric minicars to be introduced in 2009.

Nissan Motor Co., Japan's third-largest carmaker, and NEC said in May they will build a plant in Japan to make lithium-ion batteries. The automaker plans to sell all-electric cars in the U.S. and Japan by 2010 and to introduce them globally by 2012.

Lithium-ion batteries are lighter and can store more energy than nickel-metal batteries now used in most hybrid cars. Crude oil prices reached a record $147.27 on July 11 and are 46 percent higher than a year ago.

To contact the reporter on this story: Mikako Nakajima in Tokyo at mikako@bloomberg.net; Tomomi Hirano in Tokyo at thirano4@bloomberg.net.

Last Updated: September 4, 2008 02:17 EDT