Toyota says the risk of a lithium power source bursting into flames under stress is not worth the reward. Daimler and BMW, meanwhile, have joined forces to produce a new hybrid powertrain in an effort to prove Toyota wrong.

Built to replace the Two Mode hybrid powertrain developed in conjunction with GM, the new BMW-Mercedes mild hybrid powertrain should be less expensive and more efficient than the model it's replacing - and it will run on longer lasting lithium-stored electricity.

The first car to sport the new BMW-Mercedes mild hybrid system will be Mercedes' 2009 S400 Hybrid sedan, reports Automotive News. The electric motor, wedged between the engine and transmission, is powered by a lithium-ion battery pack, which will be manufactured by Johnson Controls-Saft. Output of the V6 petrol engine will be a stout 279hp, with the electric motor contributing 20hp. Performance is crisp, reaching 60mph in 7.3s. Mercedes claims this system will make the S400 mild hybrid the most fuel-efficient luxury sedan in the world. BMW will follow suit with its own X6 Hybrid.

While the battery pack in this mild hybrid will certainly be under less strain than one in a full hybrid or electric car, it only takes one catastrophic failure to taint the whole line. We'll have to wait until the European launch of the S400 Hybrid in mid-2009 to see if Toyota is just scaremongering, or if BMW and Daimler are playing it fast and loose.