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                                                                 Exhibit 10.20.2
                                                                 ---------------

                   [LETTERHEAD OF ELECTRIC FUEL CORPORATION]



                               January 12, 2001



Mr. Robert S. Ehrlich
c/o Electric Fuel Corporation
Western Industrial Park
P.O. Box 641
Beit Shemesh 99000
------------------

Dear Bob:

                    Re:  Your Employment Agreement dated January 1, 2000
                         -----------------------------------------------

In connection with your employment with Electric Fuel Corporation and Electric
Fuel (E.F.C.) Ltd. (together, the "Company"), we wish to amend the Second
Amended and Restated Employment Agreement dated January 1, 2000 between you and
the Company (the "Agreement") in certain respects.

     1.   Notwithstanding anything to the contrary in the Agreement, it is
          hereby agreed between us that we shall have the right, unilaterally on
          90 days' written notice to you, to extend the term of the Agreement
          until December 31, 2003.

     2.   As part of the consideration for your extension of the term of the
          Agreement as aforesaid, we will offer you the opportunity to purchase
          up to 100,000 shares of our common stock and up to 100,000 warrants to
          purchase shares of our common stock, at a total purchase price of
          $556,250 (based on a closing price per share of our common stock on
          January 12, 2001 of $5.5625 per share), on the following terms and
          conditions:

               (a)  The total purchase price for the shares and the warrants
                    will be $556,250, of which you will pay $1,000 in cash, and
                    the remaining $555,250 by means of a ten-year, non-recourse
                    promissory note dated January 12, 2001, bearing interest at
                    the Interest Rate.
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                                      -2-

          (b)  Of the 100,000 warrants, 33,333 warrants shall be warrants to
               purchase up to 33,333 shares of common stock at a purchase price
               of $7.5094 per share, expiring on October 12, 2001, and 66,667
               warrants shall be warrants to purchase up to 66,667 shares of
               common stock at a purchase price of $8.3438 per share, expiring
               on October 12, 2006. Terms of purchase of common stock pursuant
               to these warrants shall be similar to the terms of purchase
               provided for in subparagraph (b) above (i.e., par value in cash
               and the remainder by ten-year non-recourse note bearing interest
               at the Interest Rate applicable on the date of exercise of the
               warrants).

          (c)  You shall provide security for the promissory notes referred to
               above that shall be adequate under 12 U.S.C. (S) 221 et seq.
               (Regulation U), which will include at a minimum all shares of our
               common stock acquired by you pursuant to this paragraph 4.

          (d)  The proceeds of any sales of the common stock purchased by you
               hereunder shall be used to reduce proportionally the amount of
               your outstanding loan from us, principal and interest. For
               example, if prior to the exercise of any warrants you sell 10,000
               shares of the common stock purchased by you hereunder, the
               proceeds of this sale will be used first to pay down 10% of the
               original principal and 10% of the interest under your loan.
               Furthermore, we may withhold from such proceeds such amounts for
               taxes, etc. as we may be required to do under law.

          (e)  Should you leave the employ of the Company prior to December 31,
               2002 (or December 31, 2003 should we exercise the option to
               extend the term of the Agreement granted to us in paragraph one
               above), all securities purchased by you under the terms of this
               paragraph 4 shall revert back to the Company.

          (f)  You acknowledge that these securities have not been registered
               under the United States Securities Act of 1933, as amended, or
               the rules and regulations thereunder (the "Securities Act"), and
               accordingly are restricted within the meaning of, and subject to
               applicable impediments pertaining to the transfer of restricted
               securities under, the Securities Act. You represent and warrant
               to us that these securities are being and will be acquired by you
               in good faith solely for your own account, for investment
               purposes and not with a view to subdivision, distribution or
               resale, and may not be sold, transferred or assigned in the
               absence of an effective registration statement for these
               securities under the Securities Act or an opinion of our counsel
               that registration is not required under the Securities Act.

          (g)  As used herein, the term "Interest Rate" shall mean a rate equal
               to the lesser of (i) 6.5%, and (ii) 1% over the then-current
               Federal Fund Rate.
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                                      -3-

          5.   In all other respects, the terms of the Agreement will govern the
               relationship between us.

          If the foregoing is acceptable to you, kindly sign this letter in the
space provided for your signature below, whereupon this letter will become a
binding amendment to the Agreement.

                                       Sincerely yours,

                                       ELECTRIC FUEL CORPORATION


                                       By: /s/ Yehuda Harats
                                          ----------------------------
                                          Yehuda Harats
                                          President and Chief Executive Officer

ACCEPTED AND AGREED:


  /s/ Robert S. Ehrlich
------------------------------
              Robert S. Ehrlich