Green car market gets ugly with Nissan battery announcement

The word of the day in Silicon Valley is "Yikes."

Nissan and NEC on Friday announced the formation of a joint venture that will start producing lithium ion batteries for hybrids by 2009. Lithium ion batteries can also be used in all-electric cars. Nissan plans to release a hybrid in 2010.

While a deal like this was expected--many major car makers have spoken more optimistically about lithium ion in the past year--it's still not good news for companies like Valence Technology, Altair Nanotechnologies and Tesla Motors. Valence and Altair make lithium ion car batteries, and Tesla makes both lithium ion batteries and cars that run on them.

All three companies are fairly small operations and can be considered still in the start-up phase. Nissan and NEC, of course, are sprawling multibillion-dollar operations stacked deep with engineering talent. Japan also has no shortage of lithium ion experts; the technology got started there, after all, and many of the large manufacturers are Japanese. In a bad quarter, one of the two might lose more money than one of these start-ups might earn over a couple of years.

Large companies have stumbled with electric cars before, so no one can say Nissan and NEC have won this race by any means. Still, the joint venture presents a scary, looming competitor. This isn't the software world, where a couple of guys and a server can create a huge business. Making components and cars requires factories, employees, distribution channels and connections. Other automakers, a notoriously conservative bunch, will likely consider the size and scale of the joint venture when debating what battery to adopt for their own cars. The joint venture will have a large, built-in customer in Nissan to support it, too.

So the race is on.