Boston-Power, one of the most highly funded battery companies in the U.S., has landed a deal to develop experimental electric cars in a coalition that includes Saab. SEK, the Swedish energy agency, will fund the $12 million project that will build over 100 electric cars next year.

Unfortunately, it comes the same day that Beijing Automotive Industry Holdings (BAIH) has agreed to buy some assets of Saab.

Will it last? Will it lead to production deals? Or will BAIH do what a lot of Chinese companies do: turn to local manufacturers. China has no shortage of lithium-ion battery makers and manufacturers have a strong tendency to work with local suppliers. (U.S. companies, are you listening.) Then again, Boston-Power produces its batteries in China so it's not a stranger.

Either way, it's an interesting development to watch. Boston-Power makes a lithium-cobalt battery. That's the same chemistry inside the batteries inside notebooks and the Tesla Roadster. They can deliver a wallop of power, but safety has been an issue: internal short circuits and high heats can lead to the euphemistic "thermal runaway reaction." The company's secret sauce is quality control: Boston-Power has fine-tuned the casing, the anode, the cathode and other systems inside the battery. In the end, this results in a battery that can last three years, or 1,000 charging cycles, before the battery's capacity to hold power becomes substantially diminished. Conventional lithium-ion batteries might only go 300 cycles or less.

Many auto manufacturers have chosen to concentrate on lithium-manganese batteries or lithium phosphates, which can't deliver as much power but are also less likely to burst into flames. It's a trade-off. The Nissan Leaf, which runs on a lithium-polymer-manganese battery, will be one of the major test cases for lithium manganese.

Boston-Power, which is not related to the chain of chicken restaurants, raised $55 million in January and has raised $125 million since 2005. However, it struck out in DOE grants. Still, the funds raised could help the company get through these challenging times. Imara, which made lithium-manganese batteries, last week called it quits after it couldn't find financing to build a factory.

Hewlett-Packard has put Boston-Power's batteries in a few notebooks and the company has been trying to move into cars.

Tags: batteries, boston-power, china, electric cars, lithium ion, lithium manganese, saab