“When Toyota launched the Prius, no one thought it would succeed in the marketplace so soon,” says Koji Endo, an industry analyst at SBI Securities. “Looking back, I think we have to give huge credit to the automaker. The only mistake Toyota made is that it thought the hybrid world would continue much longer than it now appears likely.”

Adds veteran analyst Takahashi Nakanishi, CEO of Nakanishi Research Institute: “Toyota is overconfident about its hybrid technology and the transition to full-electric technology. I am not 100% convinced about that. It all depends on the battery.”

The battery was the most expensive component in the first-generation Prius. It remains the most expensive component today. The battery was the main reason the automaker lost an estimated ¥1 million (nearly $10,000) on each Prius sold in its early years.

When Toyota announced its hybrid system in March 1997, it did not report it was working separately to develop batteries with two Matsushita Group companies and, by extension, Ovonic Battery, from which the former Matsushita Battery Industrial Co. had entered into a licensing agreement.

In December 1996, three months before the announcement, the automaker established a joint venture with Matsushita Battery and its parent, the former Matsushita Electric Industrial Co., to develop and manufacture batteries for future cars. The JV’s name was Panasonic EV Energy.

Toyota set up two development tracks: PEVE, as the JV was called, and a second with a “keiretsu” supplier, Toyota Automatic Loom Works, later renamed Toyota Industries.

Toyota Automatic Loom Works was developing the technology for its forklift business in hopes of converting from diesel to battery power to promote cleaner air inside factories and warehouses.

PEVE would supply nickel-metal-hydride batteries to Toyota and Honda for the limited-production RAV4 and EV-Plus electric cars, both introduced in 1997, as well as the Prius.

Japan already had staked out a leadership position in NiMH batteries for small applications including consumer electronics and early-generation handheld phones and laptops.

Moving upmarket to cars was not a simple matter. For both Matsushita Battery and PEVE, Ovonic’s technology and patents were needed.

In 2001, Ovonic Battery sued Matsushita Battery, PEVE and Toyota for alleged patent infringement of its NiMH technology. It negotiated a substantial cash settlement in 2004.

The Japanese supplier claimed had improved the technology. But Subhash Dhar, the founding president of Ovonic and now an industry consultant, says, “If I have a patent on a tire and you improve the tread, you still need my tire.”

Ovonic has gone through multiple ownership changes and currently is a subsidiary of chemical company BASF. Energy Conversion Devices filed for bankruptcy in 2012.

In October 2008, Matsushita Electric consolidated several operations including Matsushita Battery under the name Panasonic Corp. The following month it entered into negotiations to acquire Sanyo Electric, Japan’s second-largest battery maker. The acquisition was completed in April 2011.

In October 2008, Matsushita Electric joined several operations including Matsushita Battery to form Panasonic Corp. In November of that year, it entered into negotiations to acquire Sanyo Electric, Japan’s second-largest battery maker. The acquisition was completed in April 2011.

In 2009, PEVE began producing Li-ion batteries. Those batteries were adopted for 7-seat versions of the Prius Alpha (sold as the Prius c in the U.S.) and later for the eco version of the Prius. In 2010, Panasonic EV Energy was renamed Primearth EV Energy.

In 2016, PEVE began producing NiMH batteries at a joint venture in Changshu, China. The company, Corun PEVE Automotive Battery, supplies NiMH batteries to GAC Toyota for the Levin and Corolla hybrids.

PEVE reports Toyota is conducting a feasibility study on producing Li-ion batteries in the U.S. Based on the Dec. 13 announcement that the automaker and Panasonic will work together to develop prismatic batteries, it is likely Toyota will adopt Panasonic technology for its next-generation EV and plug-in hybrid batteries. Whether they will be produced by PEVE or Panasonic is an open question.