Last fall, Watertown, MA-based startup A123 Systems announced that its advanced lithium-ion batteries would make rechargeable circular saws and drills more powerful than plug-in tools (see “More Powerful Batteries”). The company, having delivered on its promise (the tools will be available at The Home Depot this weekend), has now built a battery pack that Ric Fulop, one of the company’s founders and its vice president of marketing and business development, says could make hybrid vehicles cheaper and more convenient, while maintaining or improving performance.

The new hybrid battery pack was unveiled this week at the Advanced Automotive Battery and Ultracapacitor Conference in Baltimore. It could be appearing in vehicles within three years, Fulop says. The pack weighs about as much as a small laptop computer, yet fits into a case smaller than a carton of cigarettes. Ten of them would replace the 45-kilogram battery in the Prius, Fulop says; and if one failed, the consumer could continue to drive the car using the remaining batteries, then replace the faulty one as easily as changing the battery on a rechargeable tool.

Such convenience could start to look more and more attractive as today’s hybrid cars age and drivers face the need to replace worn-out batteries – especially second owners who won’t have warranty coverage. So far, however, battery replacement isn’t a big issue in the industry. In Japan, where the Prius has been on the market much longer than in the United States, for instance, Toyota just got up to a few hundred batteries last year in its recycling program.

Probably more important than ease of replacement, though, is the potential for cost savings and increased safety. Because the advanced lithium-ion batteries put a lot of power into a small, light package, a much smaller battery is needed to power the car, which could reduce hybrid prices. As a result, a variety of cars in a fleet could come with a hybrid option that costs about as much as the option for an automatic transmission, Fulop says. Furthermore, lower-priced hybrid cars that have the acceleration and other performance features customers want could help hybrids capture more of the vehicle market, especially if a hybrid drive train can be offered on a wide variety of vehicles, according to analyst Hideo Takeshita of the Institute of Information Technology in Tokyo.

In the short term, however, Takeshita’s seemingly logical assumption about lower-cost hybrid cars might not be right. Scott Miller, CEO of the market-trend analysis company Synovate Motoresearch, in Royal Oak, MI, says a major reason consumers buy hybrids today is to have a “badge of honor” that shows their commitment to the environment or to curbing gasoline use. And it’s an opinion shared by Toyota’s Hermance. Part of this distinction, as Miller sees it, comes from having to pay a price premium for the vehicle. Hence, in the short term, he says, it might actually be wise for carmakers to leave hybrid prices higher.

A123’s batteries use a nanostructured lithium-ion phosphate material, an advanced version of the type of battery used in laptops. The company says they’re far safer than ordinary lithium-ion batteries – which can catch fire or explode if overcharged, overheated, or damaged, hazards that would require expensive engineering to make them useable in vehicles. The new battery is safer because its cathode material, unlike conventional materials, does not release oxygen under these conditions; without oxygen, the liquid electrolyte will not combust. This safety advantage, along with the ability to pack a lot of power into a small, light package has caught the eye of several automakers, Fulop says.

This power could also have non-automotive applications in addition to power tools – the company is attracting attention from large companies such as GE and Motorola, Fulop says. Although he cannot give specifics yet, he says “what is really exciting about this technology is the ability to do starting jet engines, the ability to do alternative drive trains, the ability to do medical device systems that you couldn’t do before.” Although he adds that “automotive is where we expect to have the majority of our business.”

Even with the advantages of its batteries, however, A123 will have a challenge getting them into vehicles. The company enters a market already crowded with developers of hybrid-vehicle batteries. Menahem Anderman, president of Advanced Automotive Batteries, which organized this week’s conference, was able to list 10 competitors, and said there are many more, many of them major Japanese companies with established connections to automakers.