EXHIBIT 10.36
                      TERMINATION AGREEMENT


      This termination agreement (hereinafter referred to as  the
"Termination Agreement") is entered into as of this  6TH  day of
March, 1996, by and between ELECTROSOURCE, INC., a Delaware  
corporation, having a principal place  of  business  in
Austin,  Texas (hereinafter referred to as "Electrosource"),  and
MITSUI   ENGINEERING  &  SHIPBUILDING  CO.,  LTD.,   a   Japanese
corporation, having a principal place of business in Tokyo, Japan
(hereinafter referred to as "Mitsui").  Electrosource and  Mitsui
may  hereinafter be collectively referred to as the "Parties" and
from time to time may be individually referred to as the "Party."

                            RECITALS
                                
     WHEREAS, Electrosource and Mitsui, on or about July 7, 1994,
entered  into that certain Distributorship Agreement, as  amended
August  25, 1994 and March 23, 1995 (hereinafter referred  to  as
the  "Distributorship Agreement"), and Electrosource and  Mitsui,
on  or  about  October 26, 1994, entered into that  certain  Note
Purchase Agreement (hereinafter referred to as the "Note Purchase
Agreement"), and Electrosource issued to Mitsui its Three Million
Eight  Hundred thousand (US $3,800,000) 5% Convertible Promissory
Note (the "Note"), and

      WHEREAS, Mitsui gave notice to Electrosource on December 5,
1995 of termination of the Distributorship Agreement pursuant  to
Article 22.2 thereof, effective January 4, 1996, and

      WHEREAS,  Electrosource and Mitsui wish to agree  upon  the
details  of  such  termination, settle all outstanding  financial
matters  under the Distributorship Agreement and further wish  to
make certain modifications to the Note Purchase Agreement,

      NOW,  THEREFORE, in consideration of the premises  and  the
covenants  and conditions contained herein the Parties  agree  as
follows:
                                I
                           TERMINATION

       1.1   Mitsui  terminated  the  Distributorship  Agreement,
pursuant to Article 22.2 thereof, effective January 4, 1996.

                               II
                         PAYMENT OF FEES
2.1  Mitsui shall make the payments required under Section 2.1(b)
and  (c) of the Distributorship Agreement in the amounts  of  Two
Hundred  Thousand US Dollars (US $200,000.00) and  Eight  Hundred
Thousand US Dollars (US $800,000.00), respectively, which  totals
One  Million US Dollars (US $1,000,000.00) to Electrosource.  The
payment  shall  be made by applying One Million  US  Dollars  (US
$1,000,000.00) of the principal amount of the Note  against  such
license  fee  as provided for in Section 5D of the Note  Purchase
Agreement.

      2.2   The resulting balance of the principal amount of  the
Note  shall then be Two Million Eight Hundred Thousand US Dollars
(US  $2,800,000.00), and Electrosource shall immediately issue  a
replacement  note  (the "Replacement Note")  in  that  amount  to
Mitsui.    Mitsui  shall  in  exchange  surrender  the  Note   to
Electrosource.  The Replacement Note in the principal  amount  of
Two Million Eight Hundred Thousand US Dollars (US  $2,800,000.00)
shall  otherwise be on the same terms and conditions as the Note.
The terms "Note" and "Notes" in the Note Purchase Agreement shall
include the "Replacement Note" and such terms shall have the same
meaning herein as in the Note Purchase Agreement.

      2.3   In  addition, on the date of issue of the Replacement
Note,  Electrosource will pay interest on the  Note  and  on  the
outstanding interest Note issued in October 1995 accrued  to  the
date   of  issue of the Replacement Note by issuing an additional
Note pursuant to Section 1A of the Note having terms identical to
the  Note  in a principal amount equal to the amount of  interest
accrued  and  unpaid on the Note and on the outstanding  interest
Note  issued  in  October 1995 as of the date  of  issue  of  the
Replacement Note.

      2.4   Electrosource  shall  remit  to  Mitsui  One  Hundred
Thousand US Dollars (US $100,000.00) for Japanese withholding tax
to  be  paid  by  Mitsui  on  the  One  Million  US  Dollars  (US
$1,000,000.00)  license fee payment referred to  in  Section  2.1
hereof.  This remittance will be made by wiring funds to Mitsui's
bank account on or before the date of the payment in Section  2.1
hereof.
                               III
                      OUTSTANDING INVOICES
      3.1   Mitsui has provided reasonable documentation for  all
batteries  invoiced that it asserts have failed under proper  use
or   were  not  received  in  good  condition,  the  disposal  or
reclamation  records,  and  the letter  regarding  the  prototype
batteries set forth in Don Orr Memorandum, attached as Exhibit  A
hereto for Electrosource's review.  As a result, the Parties have
agreed  upon  the  amount  of payment  for  outstanding  invoices
submitted  by Electrosource to Mitsui, and for which payment  has
not  yet been received by Electrosource, to be US $19,203.36  and
US  $62,160  for prototypes ordered and canceled.   Mitsui  shall
make  such payments in the total amount of US $81,363.36   within
ten  (10)  business days after Mitsui's receipt of  invoice  from
Electrosource or ten (10) business days after Mitsui's receipt of
US  $100,000 set forth in Section 2.4, whichever is the later  by
wiring  funds  to  Electrosource's bank  account.   Electrosource
shall  credit  or  return to Mitsui amounts paid  for  prototypes
ordered but not delivered to the extent Electrosource covers  the
cost of same by sales to others, less reasonable additional costs
incurred as a direct result of such resale.  Electrosource  shall
report  to  Mitsui on a monthly basis on the record of  sales  of
such prototypes.
                               IV
                     REGISTRATION OF SHARES
     4.1  Upon Mitsui's written request which must be made, if at
all,  and  received by Electrosource within 10 days of  the  date
hereof,  Electrosource  will use its best reasonable  efforts  to
file  a  registration statement on Form S-3 or amend its existing
registration statement on Form S-3 within thirty (30) days  after
receipt  of  such request for  registration for  the  purpose  of
selling  the  shares  of Common Stock (as  defined  in  the  Note
Purchase  Agreement)  issued or issuable upon conversion  of  the
Notes.  Electrosource  shall use its best reasonable  efforts  to
make  effective  and keep effective for a period of  nine  months
such   registration  statement.  Electrosource  believes  it   is
currently  eligible  to  use Form S-3  and  it  has  a  currently
effective  S-3 registration.  If Electrosource is not able  after
reasonable  effort   and the cooperation  of  Mitsui  to  have  a
registration  on  Form  S-3 (as amended  or  otherwise)  declared
effective,  Mitsui  may rescind its notice  of  conversion.  This
immediate  registration right will apply only if  Mitsui  in  the
aforesaid  notice  converts,  or  commits  to  convert  upon  the
effectiveness  of the registration statement, the Notes  in  full
into  shares  of  Common Stock at the rate provided  for  therein
which is Three and 80/100 US Dollars (US $3.80) per share.

       4.2   The  plan  of  distribution  by  Mitsui  under  such
registration   statement,  when  effective,   may   include   and
underwritten offering, sales from time to time on NASDAQ and  any
other permitted manner of sale.  Mitsui agrees that it shall  not
pursuant to such immediate registration statement sell on  NASDAQ
in  excess  of twenty thousand (20,000) shares  in any  one  day,
except  in  block  transactions or as may be  otherwise  mutually
agreed.     This immediate registration right is in addition   to
the  existing registration rights set forth in Section 7A(i)  and
(ii)  of  the  Note  Purchase Agreement.  Upon Mitsui's  request,
Electrosource will assist Mitsui in attempting to find a buyer or
buyers  to purchase the shares of Common Stock issued or issuable
upon conversion of the Notes.
                                
                                V
                     OPTION TO PURCHASE NOTE
      5.1   Until October 1, 1996, Mitsui grants to Electrosource
the  option  to re-purchase the Notes for a price  equal  to  the
number of shares issuable upon conversion of the Notes times  the
greater of (x) $1.50 per share or (y) the market price per share.
"Market price" means the average closing price per share reported
by  NASDAQ for the last five (5) trading days prior to notice  of
exercise  of this option.  The $1.50 per share amount is  subject
to review and change after mutual discussion.  This option can be
exercised  by  Electrosource by written notice and together  with
tender  of  the  cash  purchase price.   Such  option  cannot  be
exercised  if  Mitsui has already agreed to  sell  the  Notes  or
Common  Stock issuable on conversion thereof in a signed  binding
agreement  or has  engaged an underwriter or placement agent  for
an  underwriting or placement of such Common Stock. Mitsui cannot
convert  the  Notes  to  shares of Common Stock  after  receiving
valid  notice by Electrosource of exercise of its option together
with tender of the purchase price.  If Mitsui requests by written
notice  to  Electrosource to exercise this option,  Electrosource
will duly consider such request, given its financial condition at
the time.
                               VI
                       FUTURE LICENSE FEES
      6.1  For a period of two (2) years from the date hereof, if
Mitsui  wishes  to  re-purchase  an  exclusive  or  non-exclusive
distribution or manufacturing license for Electrosource  Products
for  Japan,  and  subject to agreement on  all  other  terms,  if
Electrosource  has  not previously committed  such  territory  to
another   party   on  an  exclusive  basis,   then   Mitsui   and
Electrosource  will  re-enter into such  licensing  relationship,
subject  to  any other pre-existing rights in other  parties  and
Electrosource will credit against any license fees that may  then
be agreed upon the Two Million US Dollars (US $2,000,000.00) that
Mitsui has paid for distribution rights under the Distributorship
Agreement.
                               VII
                     CONTINUING COOPERATION
      7.1   It  is  the Parties' intention to dialogue,  exchange
information and discuss marketing and other matters from time  to
time   to   promote   commercialization   and   improvement    of
Electrosource products.  The Parties will not speak negatively of
each  other or their relationship.  Electrosource and Mitsui  may
well entertain future relationships as the business develops.

                              VIII
                             RELEASE
      8.1   Each of the Parties herein hereby fully releases  and
discharges  the other from any and all other claims,  damages  or
amounts  owing, except as is specifically set forth  herein,  and
except  as set forth in the termination provisions of Article  23
of the Distributorship Agreement.

                               IX
               SURVIVAL OF NOTE PURCHASE AGREEMENT
      9.1  Except as expressly provided herein, all the terms and
conditions of the Note Purchase Agreement shall be unaffected and
remain in full force and effect.

                                X
                         BINDING EFFECT
      10.1 This Agreement shall be binding upon and inure to  the
benefit of the Parties hereto.

                               XI
                  GOVERNING LAW AND ARBITRATION
      11.1  This  Termination Agreement shall be subject  to  the
governing  law  provisions  and  arbitration  provisions  in  the
Distributorship Agreement.

       IN   WITNESS  WHEREOF,  the  Parties  have  executed  this
Termination Agreement on the date first above written.

ELECTROSOURCE, INC.                     MITSUI ENGINEERING &
                                        SHIPBUILDING CO., LTD.

By:       /s/                           By:        /s/
  Michael G. Semmens                    Hitoshi Narita
  President and Chairman of the Board   Managing Director