Over the past decade, consumers have mostly overcome unfounded fears about the safety and longevity of batteries in their hybrid cars. But now the trusted battery technology, nickel metal hydride, is slowly being replaced by lithium ion—raising questions about which automaker will make the switch to lithium and when.

Toyota—the leading maker of hybrid cars—has relied on nickel metal hydride ever since starting to produce gas-electric cars. Shinzo Kobuki, senior managing director of Toyota's battery technology, earlier this month told Automotive News that the company has no intention of switching to a lithium ion battery for its hybrids—at least for the next 10 years. Kobuki said that converting to lithium would mean “at best a 1 to 2 percent increase in the vehicle’s performance.”

Toyota’s decision to stay put with nickel probably has a lot to do with its joint venture, now known as Primearth EV Energy Co., and formerly known as Panasonic EV. In late 2009, that entity went from big to really big when Panasonic acquired a majority control of Sanyo for $4.6 billion—giving the pair a market share in nickel metal hydride batteries of about 80 percent. That means sunk costs, economies of scale, and a good deal on the current battery technology.

As early as September 2009, Toyota had come to the conclusion to stick with nickel more than a year ago. The company said it conducted three years of “secret tests” on 126 Toyota Priuses equipped with lithium ion batteries. Toyota engineers like nickel metal hydride for its proven durability, stability and safety. Executives like its cost advantage—especially considering the volume of hybrids that Toyota produces with nickel batteries.

Meanwhile, Toyota is gaining new knowledge about the use of lithium batteries in pure electric cars, by virtue of its partnership with Tesla Motors. Tesla is figuring out how to optimize the use of thousands of commodity lithium batteries—the kind used in cell phones and laptops—for its vehicles. Toyota has invested $50 million in Tesla and is co-producing the RAV4 EV with the company. Last month, Greg Bernas, the chief engineer for the RAV4 EV told us that the "whole battery development will be different" on the Toyota S.U.V. from what Tesla currently uses.

Toyota will use also lithium batteries for the Prius Plug-in Hybrid and small commuter EV, both expected in 2012.

Having the right battery at the right cost is half the battle for hybrids and electric cars. Toyota and Panasonic have dominated hybrids for the past decade and are maneuvering to do the same when it comes to electric cars. According to Bloomberg, Panasonic last month bought a $30 million stake in the electric car start-up.

Toyota says that nickel metal hydride batteries perfectly suit the needs of hybrids, like the 2010 Prius. It uses a relatively small 1.4 kWh pack.