The soaring price of oil seems to be forcing a sea change in the car business. Japan's Toyota Motor (NYSE: TM) today announced a range of environmental initiatives to make its vehicles more efficient, including plans to start production of lithium-ion batteries for plug-in hybrids.

The move from Toyota comes on the heels of news of cutbacks in the production of sport-utility vehicles from Tokyo-based Nissan Motor (Nasdaq: NSANY) and Detroit's General Motors (NYSE: GM) amid a drop in sales for the gas-guzzlers.

Katsuaki Watanabe, president of Toyota Motor, said in a press conference that more cars are coming onto the roads, especially in developing countries.

"Some say vehicle ownership will exceed one billion units by 2010, or exceed 1.5 billion units by 2020," said Watanabe.

"The impact on the global environment will be that much greater, which we must be keeping in our minds."

There are likely to be fewer SUVs in those future numbers, as Nissan is the latest company to cut back on production of the vehicles, which are dropping in popularity as consumers move to smaller, more fuel efficient cars.

Nissan said one shift of workers at its plant in Canton, Miss., would switch to production of the company's Altima mid-sized sedan this month.

The company said the the additional shift would increase Altima production by 2,000 vehicles to 17,000 cars monthly.

General Motors is closing four of its truck plants, in Oshawa, Ontario; Moraine, Ohio; Janesville, Wis.; and Toluca, Mexico.

GM said it's also considering all options for the Hummer brand, including a partial or full sale of the unit.

While all of the major automakers are selling or developing alternative fuel vehicles, Toyota makes the most popular gasoline-electric hybrid vehicle on the road today, the Prius, which reached one million units sold in April.

Take a look at the Prius here >>

That car could be getting an upgrade in the near future, as Toyota said it would commence limited production of lithium-ion batteries in 2009 under a joint venture with the Matsushita Group, moving into full-scale production in 2010.

The Panasonic EV Energy venture currently produces nickel-metal hydride batteries for use in Toyota's hybrid vehicles.

Nissan also has a lithium-ion venture, teaming up with Tokyo-based NEC (OTC: NIPNY) on vehicle batteries.

In January, Palo Alto, Calif.-based Project Better Place announced that it would work with the Renault-Nissan Alliance to launch an electric car and charging network in Israel (see Electric cars are coming to Israel).

The cars for Project Better Place will come from France's Renault, which plans to start selling an all-electric vehicle in 2011, with the lithium-ion battery pack coming from Nissan and NEC.

The Renault-Nissan Alliance, formed in 1999, is the fourth largest automotive group in the world by sales volume.

Project Better Place and Renault-Nissan also plan to bring electric vehicles to Denmark (see Project Better Place goes to Denmark).

Mitsubishi Motors is another car maker working on the mass-production of lithium-ion batteries, with Mitsubishi forming a venture with GS Yuasa.

Toyota said it plans to introduce a plug-in hybrid vehicle equipped with a lithium-ion battery by 2010, geared toward fleet customers in Japan, the U.S. and Europe.

But the company doesn't plan to stop at lithium-ion. Toyota said it would establish a battery research department later this month to advance the development of a next-generation battery that can outperform lithium-ion.

The automaker has a long-term goal to make hybrid versions of all of its vehicles, and is aiming to achieve hybrid vehicle sales of one million vehicles annually as early as possible in the 2010s.

"We need to achieve quantum enhancement of the performance and fuel efficiency of hybrid systems," said Watanabe.

"The reduction of size, weight and cost hold the key."

Watanabe said the company is working to cut the size, weight and cost of its hybrid system to one-quarter of the first-generation Prius.

Earlier this week, Toyota said it had developed a new fuel cell hybrid electric vehicle that can travel more than twice the distance of its previous model without filling up (see Toyota boosts range of fuel cell hybrid).

Toyota said the improved FCHV-adv model has a maximum cruising range of 516 miles, up from 205 miles.

The car company also said its conducting research on a cellulosic ethanol, focusing on using technologies that involve yeast.

Toyota said it's also working with Nippon Oil on high-concentration bio hydrofined diesel, also known as BHD, as a biofuel alternative.

Biomass to liquids are also on the table at the automaker, which said it's conducting research on the technology. BTLs are derived from synthesizing gas made from all types of biomass, including cellulose.

Is it, in fact, a watershed in biofuels from algae?

Naples, Fla.-based Algenol Biofuels says it has found a way to inexpensively bring third-generation biofuels to industrial scale.

And, unlike most algal biofuel companies, it's apparently got a licensing deal for an $850 million project to show for it.

The company believes its seawater-based process can generate up to a billion gallons of algal ethanol per year from a facility in Mexico.

“We’re not in the biodiesel business, the lipids business or oil business,” according to CEO Paul Woods. “We believe we have the most advanced third-generation technology. Our process is completely different.”

Algenol claims to use algae, sunlight, CO² and seawater in closed bioreactors to produce ethanol, not the biodiesel most conventional algae companies are pursuing.

Woods told Cleantech Group today that because his company does not use freshwater and does not harvest the algae, the process is much less expensive.

“You have to do it cheaply, or you have no process,” said Woods.

Woods did not specify how cheap, however.

With a reported 11 years of research and 10 years of patents under its belt, Algenol formally introduced itself and an $850 million project with Sonora Fields S.A.P.I. de C.V., a wholly owned subsidiary of Mexican-owned BioFields.

The privately-funded company said it is expecting yields of 6,000 gallons per acre per year, and expects to increase that figure to 10,000 by year end.