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GM Ventures, the venture-capital arm of General Motors, announced today it has teamed up with Itochu Technology Ventures to invest $4.2 million into Sakti3, a lithium-ion battery developer.

Sakti3, a spin-off from the University of Michigan, is working on battery cells that could be smaller, cheaper and more effective than what’s currently on the market – potentially resulting in batteries that could extend its range of electric cars. The company’s technology uses solids instead of the standard liquid electrolyte and electrodes.

“The technology will eventually make it into GM batteries/vehicles, but it’s years away from commercial applications,” said GM spokeswoman Allison Ackels. “When the technology becomes commercially viable, it could be in future GM cars and trucks.”

GM, which it set to release the Chevrolet Volt electric hybrid later this year, reportedly invested $3.2 million.

The reborn General Motors opened its venture-capital branch in June to fund advanced transportation projects. With its backing and that of Japanese conglomerate Itochu (which recently invested in video platform Ooyala and game startup Tonchidot), Sakti3 should be able to speed the commercialization of its batteries.

This is the second announcement from GM Ventures, which said last month it would invest $5 million in Bright Automotive, which makes a hybrid van.

Range and the reliability of batteries are big question marks in the electric car market. While consumers have tax incentives to purchase an electric car – the Nissan Leaf, Coda sedan and Chevrolet Volt all debut at the end of this year – questions remain about the range of these cars and the reliability of the batteries, which are expensive to replace. The Leaf, for example, goes about 100 miles on a single charge, but could perform worse in extremely cold or hot weather.

It’s also not clear how long the batteries last, though Nissan and Chevrolet both extended an 8-year, 100,000-mile warranty to the Leaf and Volt, respectively.

Sakti3 is led by Ann Marie Sastry (pictured above, with a Volt), a University of Michigan professor recently profiled in the New York Times. Sakti3’s  investors include Khosla and Beringea.

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