South Korean companies have agreed to form an alliance in an effort to develop a battery pack that can be mounted on future plug-in hybrid electric vehicles (PHEV), government and industry sources said Monday.

Sources said Hyundai Motor, the country's No. 1 carmaker, had teamed up with LG Chem, SK Energy and SB LiMotive to develop batteries in the next 5-6 years that will be a critical part of these eco-friendly vehicles. The development is designed to cut back on the use of fossil fuels, and help reduce greenhouse gases.

The pact outlines the competitive development of a new battery pack by the three companies, with Hyundai Motor pledging to buy as many as possible for use in their future PHEV cars. The company said it wants to roll these cars off its assembly line around 2013.

The Ministry of Knowledge Economy and Korea Automotive Technology Institute will support and guarantee the agreement by the four companies.

"Because battery quality will be the deciding factor of these vehicles, the company or country that makes the best will dominate this market," Yonhap News quoted a ministry official as saying.

PHEVs are cars that have the characteristics of both conventional hybrid electric and fully-battery-powered vehicles, but incorporate a system that allows them to be plugged into regular electricity sockets at homes or along the side of roads.

They have combustion engines, while at the same time being designed to run on battery power. This combination can improve gas mileage far beyond what is possible with ordinary gasoline, diesel and gas driven cars now.

The European Union is moving to limit carbon dioxide emissions to 130 grams per kilometer from 2012, with cars that fail to meet this standard to be levied extra fees of 20-95 euros.