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The objective of the Project is to develop an optimized lead-acid battery solution for HEVs based on a novel, individual, spirally wound valve-regulated lead-acid 2V cell optimized for HEV use and low variability. This cell will be used as a building block for the development of a complete battery pack that is managed at the cell level. Following bench testing, this battery pack will be thoroughly evaluated by substituting it for the NiMH pack in a Honda Insight. The paper covers the first half of the 3-year project and will describe work carried out in the following areas: Development of cell and battery testing facilities and identification of mechanisms causing cell lifetime scatter. The design and development of the prototype double-ended cell. The development of the battery pack specification and pack design. The development of the battery management system. The paper will also give details of the test results obtained on the demonstration vehicle with its original NiMH battery.