May 28 (Bloomberg) -- Volkswagen AG, Europe's largest carmaker, will jointly develop a lithium-ion battery system with Sanyo Electric Co. for use in hybrid cars as record oil prices spur demand for fuel-efficient vehicles.

Sanyo will spend a total of 80 billion yen ($767 million) by 2015 to make the batteries, including opening a new factory in 2010, the company said in a statement today. Volkswagen plans to introduce its first vehicle using the technology by 2010, the Wolfsburg, Germany-based company said separately.

Global automakers are working with Japanese electronics manufacturers to develop lithium-ion batteries for hybrid cars, as they are lighter and more powerful than the nickel-hydride batteries currently used. The price of crude oil has doubled in the past year and reached a record $135.09 a barrel on May 22.

``There will be constant growth in the hybrid-car market,'' Mitsuru Honma, Sanyo senior vice president, said at a press conference in Japan's Osaka prefecture today. A location for the factory has not been decided, he said.

Worldwide sales of hybrid vehicles powered with lithium-ion batteries may total between 4 million and 4.5 million units in 2015, according to Sanyo. The company aims to have a 40 percent share of the market for the batteries in 2015, Honma said.

With the new factory, Sanyo's production capacity for lithium-ion batteries will be enough to power between 1.7 million and 1.8 million hybrid vehicles a year, it said. The company plans to start mass production at its first plant next year, about six months ahead of its initial schedule.

Sanyo was unchanged at 255 yen at the 3 p.m. close of the Tokyo Stock Exchange. Volkswagen fell 0.7 percent to 179.63 euros as of 10:18 a.m. in Frankfurt.

Toyota, Rivals

Volkswagen and Sanyo, the world's largest maker of rechargeable batteries, will develop an electronic control system and the software needed to use lithium-ion batteries in autos, Sanyo said. Sanyo also supplies nickel-hydride batteries to Ford Motor Co.

Toyota Motor Corp., the world's largest maker of hybrid cars, is considering mass production of lithium-ion batteries at its venture with Matsushita Electric Industrial Co., as it aims to sell 1 million hybrid vehicles a year in the early 2010s.

General Motors Corp. plans a more powerful hybrid system for 2010 that will allow it to be used on most models. The system will use lithium-ion batteries supplied by Hitachi Ltd.'s Hitachi Vehicle Energy Ltd. unit.

Nissan Motor Co., Japan's third-largest automaker, plans to start making lithium-ion batteries through its venture with NEC Corp. from 2009. Mitsubishi Motors Corp., which plans to sell electric cars next year, also has a venture with GS Yuasa Corp. and Mitsubishi Corp. The venture is scheduled to start making lithium-ion batteries by 2009.

Honda Motor Co., Japan's second-largest automaker, buys nickel-hydride batteries from Sanyo and Matsushita. The Tokyo- based automaker plans to raise sales of hybrid vehicles ninefold by early in the next decade from last year as it adds new models, it said on May 21.

A hybrid vehicle combines a conventional gasoline engine with an electric motor. The motor powers the vehicle at low speeds, and the gasoline engine takes over as the car gains speed. The motor's battery pack is charged by the gasoline engine and power regenerated by braking.

To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net

Last Updated: May 28, 2008 05:16 EDT