Hitachi will team up with Shin-Kobe Electric Machinery Co.(JP:6934 959.00, +12.00, +1.27%) to complete prototypes of a new battery and peripheral equipment as early as fiscal 2010, the report said.

Shares of Hitachi fell 1.6%, though the stock is up around 60% from its lows in December after having gained 13% in just over a week.

Auto drive

Reductions in material and manufacturing costs are particularly important, given that the auto production will be a major catalyst for lithium-ion demand.

Macquarie analysts expect auto ramp-up to be significant by the calendar year 2015, with auto-related demand for the batteries to account for half the market by calendar year 2018.

Demand from electric vehicles will be the "real kicker," they said. These will depend entirely on electricity, so the amount of battery capacity required is "significantly higher than other end uses" for lithium-ion batteries, they said.

At the same time, the market will continued to see limited competition.

"There is unlikely to be a serious competitor in the next five years, given the expertise needed to achieve existing quality levels" for LIPF6, analysts at Macquarie said.

"Stella and KDK both claim that reaching commercialization at current product quality levels required more than 10 years of R&D," they said.

And there is "no viable, commercial substitute for LiPF6 when producing Li-ion batteries."

Myra P. Saefong is MarketWatch's assistant global markets editor, based in Tokyo.