Volkswagen, parent company to luxury marque Audi, has announced a new partnerhip to develop batteries for the next generation of hybrid cars.

The germon automaker has agreed to work with Sanyo Electric to develop lithium-ion batteries that will provide power for future cars.

Over the next seven years, the pairing will work on lithium-ion batteries to take thae place of nickel-hydride batteries used in current hybrid vehicles.

Lithium-ion batteries will provide space and weight savings compared to current energy sources.

Sanyo already has expertise in developing the batteries, though past efforts have been directed at the consumer electronics market, in which it has the largest market share.

“Our focus in future will be directed more strongly at making electrically powered automobiles alongside ones driven by more efficient combustion engines," said Volkswagen Group chief executive Martin Winterkorn.

"This cooperation is an important step for us.”

Volkswagen is preparing to mount the first of the new batteries in an Audi AG in 2010.