Toyota is about to pass another major milestone in the race to build the next-generation of hybrid vehicles with the announcement today that it will construct a new $192 million plant in Japan solely to manufacture batteries. The plant is being developed jointly with Matsushita Electric – the company behind Panasonic – and will be constructed in Shizuoka prefecture, in central Japan.

The plant will initially produce nickel-metal hydride batteries for Toyota’s current hybrid fleet as well as the next-generation Prius hybrid due at next year’s Detroit Auto Show. The Nikkei reports that a second battery plant will be built for newer lithium-ion batteries that will eventually make their way into Toyota’s new plug-in hybrid vehicle due at the end of the decade.

Mercedes-Benz is expected to be the first major carmaker with a lithium-ion powered hybrid vehicle when it launches a new S400 hybrid sedan next year, and GM is also hard at work readying its Volt plug-in hybrid for a 2010 launch. Earlier this month GM engineers reached a new milestone in testing, with initial prototypes of the car reaching the goal of 40 miles of electric-only driving.

Nissan, which still hasn't developed its own hybrid system for commercial sale, said it will have its original hybrid and electric vehicles by 2010 and announced a new its joint venture with NEC this week to start mass-producing lithium-ion batteries next year.