A123 Systems, a company we have been following closely (subscription required), announced a major expansion of its production capacity. A123 already has one plant running near Detroit, and there is a second, larger, 300,000 square facility due to open in the middle of this year in Livonia, Mich. A third factory – similar in size to the Livonia plant – will begin construction later this year.

The plants are now slated to expand beyond their original capacities. As of October 2009, A123 had 169 megawatt-hours of battery capacity. By the end of this year, A123 will have about 360 MWh of annual battery production capacity for large format automotive applications. They say that’s enough for 320,000 conventional hybrids with 1.1 kWh packs or 24,000 plug-in hybrids with 15 kWh packs.

A123 also announced a deal to supply Fisker Automotive with lithium-ion batteries. If Fisker hits its sales targets of 15,000 cars a year, it could consume most of the planned capacity. A123 plans to watch demand for batteries and add additional capacity as needed.