Toyota CEO Katsuaki Watanabe spoke to BusinessWeek recently and confirmed that the next-generation Prius will definitely have a lithium ion battery when it comes out later in 2008. Watanabe also said that Toyota was focusing on improving both the performance and efficiency of their third-generation hybrid system. The target is to cut both the size and the cost of the next-generation hybrid system by half.
Watanabe acknowledged that they had concerns with the durability and robustness of lithium ion batteries in automotive applications, due to the extreme conditions they must endure in automotive applications compared to consumer electronics. They are actively testing and developing the batteries to be able to work reliably in cars. In addition to the batteries, Toyota is also cutting the size of the motors and inverters in half compared to the current cars. If they can accomplish all of those goals they will be able to incorporate hybrid drive-trains in to more of their vehicles and widen their lead further. The only thing that wasn't mentioned was the plug-in possibility, so we'll have to wait longer to find out if that is included.