The race to develop the first mass production electric car stepped up a notch this week after Nissan announced it would sell an electric car in the US and Japan by 2010, and Volkswagen reportedly signed a major deal with Japan's Sanyo Electric to jointly develop lithium-ion batteries for use in hybrid and electric cars.

Speaking in an interview with The New York Times, Nissan chief executive Carlos Ghosn said that the company had set itself the target of becoming the first major car manufacturer to bring a zero emission vehicle to the US market and was also aiming to sell a range of electric vehicles worldwide by 2012.

He said that the move – which will bring the company into direct competition with high profile plug-in hybrid cars from General Motors and Toyota both of which are also slated for a 2010 launch – had been driven more by customer demand than new US fuel economy standards.

"What we are seeing is that the shifts coming from the markets are more powerful than what regulators are doing," he explained.

The company, which is also involved in providing the battery technology for the Project Better Place electric car initiative in Israel and Denmark, said that it was planning a full range of electric vehicles, including small commercial vehicles and minivans, as well as city cars.

Ghosn declined to give full details about the planned car, but insisted that it would not be "some Stars Wars prototype", adding that the company was aiming to deliver an affordable mass market product "that everybody can buy".

He argued that potentially as many as 10 million of the 69 million vehicles produced each year worldwide could ultimately be electric-powered, adding that the technology could provide the auto industry with a means of meeting booming demand from developing economies while still curbing carbon emissions. "The question is how we participate in the growth of emerging markets, while doing it in a way that is not in contradiction with the fact that a lot of people are sensitive to the emission levels and the preservation of the planet," he said.

Meanwhile, Volkswagen has signed a partnership agreement with Sanyo Electric to co-operate in the development of new lithium-ion batteries for the use in hybrid and all electric vehicles.

According to reports in the Nikkei financial daily, Volkswagen is aiming to start using the new battery in its hybrid and electric cars by 2012.

The two companies already have a deal in place for Sanyo to provide nickel-hydrogen batteries for use in the Volkswagen group's first hybrid model, slated to launch next year. However, it hopes that the new lithium-ion versions will prove lighter, enabling superior fuel efficiency and acceleration.