The Wall Street Journal reports Toyota has slipped in its schedule to bring out a Prius based on lithium ion batteries.

Toyota Motor Corp., which used the green image of its gasoline-electric Toyota Prius to propel a U.S. sales surge, has decided to delay by one to two years the launches of new high-mileage hybrids with lithium-ion battery technology because of potential safety problems. The slowdown could offer General Motors Corp. and other rivals a chance to narrow the gap in the race to define future clean-vehicle technology.

Until recently, Toyota was preparing to roll out a dozen new and redesigned hybrids using new lithium-ion battery technology in the U.S. between 2008 and 2010. Its hybrids now use nickel-metal-hydride batteries. But safety concerns with the lithium-ion technology have forced Toyota to back away from that timetable, people familiar with the company's strategy say.

Toyota is also slipping plans for hybrids for other models including the Tundra and Sequoia.

Toyota is going to delay the next rev of the Prius and reengineer it to use less capable NiMH batteries instead of lithium.

Officially, the car was not postponed because Toyota had never published an introduction date, but such a decision would have major implications: reverting to nickel-metal hydride batteries in today's Prius means finding room for a larger and heavier power pack. A Toyota spokesman, John Hanson, said that while the company saw "huge potential" in lithium-ion batteries, it wanted to assure future Prius buyers the same levels of affordability and reliability they experience in today's models.

But Toyota really has introduced an unexpected delay in their plans.

Speaking in February, Toyota chief Katsuaki Watanabe told BusinessWeek that the next-generation Prius, expected in late 2008 or early 2009, would use li-ions (see BusinessWeek.com, 3/5/07, "Toyota's Bid for a Better Battery"). But in recent months, Toyota appears to be having difficulties meeting that timeline.

Meanwhile GM has selected batteries from A123 Systems to make next gen hybrids.

General Motors Corp. (GM) said Thursday it has an agreement with battery developer A123 Systems to create a battery cell for the auto maker's planned Chevrolet Volt electric car, a move that could help the auto maker win a global hybrid-electric vehicle race that currently is dominated by Toyota Motor Corp. (TM).

During a speech here, GM Vice Chairman Bob Lutz said A123 will be a key supplier for GM's E-Flex system, which essentially is the propulsion designed to power the Volt and other electric cars the auto maker hopes to make. E-Flex uses an electric motor to drive a vehicle, backed up by a more traditional engine for when battery power is not adequate.

Bob Lutz says the A123 Systems battery design avoids the thermal issues that cause some lithium ion batteries to catch fire. If A123 Systems can pull this off - and at an affordable price - then pluggable hybrids will take off in a big way. GM would score big time.

We need some big steps forward in battery technology so that electric power can replace gasoline and diesel fuel for most transportation needs. With great batteries the peak in world oil production will be easy to handle. Without great batteries our post-peak living standards will take much bigger hits as oil production declines.