Mercedes-Benz will launch an S-Class hybrid equipped with a lithium-ion battery next year. Dr. Thomas Weber, who is responsible for research at Mercedes-Benz—and a long-time hybrid naysayer—said, “What we have here is a groundbreaking key technology that is going to be a decisive factor for the future success of the automotive industry.”

The use of lithium ion batteries—which can be smaller, lighter, store more energy, and deliver more power—is considered the holy grail of on-board energy storage for vehicles.

Mercedes-Benz plans to use the lithium ion batteries in the S 400 BlueHYBRID, which is powered by a 299 horsepower engine, that could offer fuel economy of 30 miles to the gallon. Daimler said this would make it “the world’s most economical luxury sedan, unrivaled by any gasoline, diesel, or hybrid drive system offered by any competitor.” Company statements did not specify if the S-Class hybrid would be introduced in Europe or the United States.

Mercedes is also promising a diesel version of the same hybrid vehicle by 2010.