Nickel-metal hydride (NiMH) batteries offer some advantages in the aspects of power, cycle life and environment. However, they are encountering challenge from other rechargeable batteries such as Li-ion batteries. In this paper, the possibility of performance improvements and cost reduction of NiMH batteries were analyzed. Some approaches to improve energy densities and reduce the battery cost were discussed. An attempt to increase the energy density of NiMH batteries was made through improvements in the specific capacity of rare earth-based AB(5)-type hydride alloys in the negative electrodes and capacity enhancement of nickel hydroxide electrode. A relatively lower cost small cylindrical NiMH cell was constructed and its properties were evaluated. (c) 2005 International Association for Hydrogen Energy. Published by Elsevier Ltd. All fights reserved.