FORM 10Q
               SECURITIES AND EXCHANGE  COMMISSION
                     Washington, D.C.  20549

(Mark One)
[X]       QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF
               THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 1997
                                
                               OR

[   ]          TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
               SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________.

Commission file number 0-16323

                       ELECTROSOURCE, INC.
     (Exact name of Registrant as specified in its charter.)

             Delaware                    742466304
 (State or other jurisdiction(I.R.S. Employer Identification No.)
of incorporation or organization)

     2809 Interstate 35 South
        San Marcos, Texas                  78666
(Address of principal executive offices) (Zip Code)


                         (512) 753-6500
      (Registrant's telephone number, including area code)


      (Former name, former address and former fiscal year,
                  if changes since last report)

      Indicate by check mark whether the registrant (1) has filed
all  reports required to be filed by Section 13 or 15(d)  of  the
Securities  Exchange Act of 1934 during the preceding  12  months
(or  for such shorter period that the registrant was required  to
file  such  reports),  and (2) has been subject  to  such  filing
requirements for the past 90 days.

Yes X  No __

       APPLICABLE  ONLY TO ISSUERS INVOLVED  IN BANKRUPTCY
           PROCEEDINGS DURING THE PRECEDING FIVE YEARS

      Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12,  13  or
15(d)  of the Securities Exchange Act of 1934 subsequent  to  the
distribution of securities under a plan confirmed by a court.

Yes __  No __
             APPLICABLE  ONLY TO CORPORATE ISSUERS:

      Indicate  the number of shares outstanding of each  of  the
issuer's  classes  of common stock, as of the latest  practicable
date:  4,146,085 shares as of August 14, 1997.


                  INDEX TO FINANCIAL STATEMENTS
                          June 30, 1997
                                

Electrosource, Inc.                                         Commission file
                                                             number 0-16323
                                                                           
                                                                           
                                                                           
Condensed Balance Sheets at June 30, 1997  (Unaudited)             
     and December 31, 1996                                  Page  3
                                                                   
Condensed Statements of Operations for the three and six           
     months ended June 30, 1997 and 1996 (Unaudited)        Page  4
                                                                   
Condensed Statements of Cash Flows for the three and six           
     months ended June 30, 1997 and 1996 (Unaudited)        Page  5
                                                                   
Notes to Condensed Financial Statements                     Page  6
                                                                   
Management's Discussion and Analysis                        Page  9
                                                                   
Exhibits to Form 10Q                                        Page 16
                                                                   
Index to Exhibits                                           Page 17




                         Part I - Financial Information

Item 1.  Financial Statements

                               Electrosource, Inc.
                            Condensed Balance Sheets

<TABLE>
                                                                   June 30, 1997   December 31,
                                                                    (Unaudited)        1996
ASSETS                                                                                   
                                                                                         
<C>                                                                 <C>             <C>    
CURRENT ASSETS                                                                           
   Cash and cash equivalents                                         $ 1,641,445     $  367,861
   Trade receivables                                                     766,088        247,631
   Inventories                                                           211,709        249,235
   Prepaid expenses and other assets                                     172,464        164,319
          TOTAL CURRENT ASSETS                                         2,791,706      1,029,046
                                                                                               
PROPERTY AND EQUIPMENT (net of accumulated depreciation                                        
   of $2,776,395 in 1997 and $2,316,995 in 1996)                       4,358,057      4,787,019
                                                                                               
INTANGIBLE ASSETS (net of accumulated amortization                                             
   of $3,103,653 in 1997 and $2,607,093 in 1996)                       2,357,907      2,854,467
                                                                                               
RESTRICTED CASH                                                          744,824        744,824
DEBT ISSUANCE COSTS                                                    1,458,698         72,950
TOTAL ASSETS                                                         $11,711,192     $9,488,306
                                                                                               
                                                                                               
LIABILITIES AND SHAREHOLDERS' EQUITY                                                           
                                                                                               
CURRENT LIABILITIES                                                                            
   Accounts payable                                                  $   818,933    $   704,841
   Accrued liabilities                                                 1,086,386      1,103,751
   Deferred revenue and advance payments on batteries                    994,805      1,157,028
   Current portion of capital lease obligations                          629,136        658,226
   Current portion of convertible notes payable                                         250,000
                                                                              --
           TOTAL CURRENT LIABILITIES                                   3,529,260      3,873,846
                                                                                               
CONVERTIBLE NOTES PAYABLE (less current portion)                       4,000,000             --
TECHNOLOGY LICENSE PAYABLE                                             1,016,353      1,248,684
CAPITAL LEASE OBLIGATIONS (less current portion)                         229,076        519,047
                                                                                               
SHAREHOLDERS' EQUITY                                                                           
   Common stock par value $1.00 per share; authorized 50,000,000                               
     shares; shares issued and outstanding: 4,110,975 in 1997 and                              
     3,857,912 in 1996                                                 4,110,975      3,857,912
   Subscriptions receivable                                            (867,000)             --
   Warrants                                                                   --             --
   Paid in capital                                                    48,850,639     45,876,668
   Accumulated deficit                                              (49,158,111)    (45,887,851)
                                                                       2,936,503      3,846,729
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                           $11,711,192    $ 9,488,306

See notes to condensed financial statements.
</TABLE>
                                        

<TABLE>
                               Electrosource, Inc.
                 Condensed Statements of Operations (Unaudited)
                                        
                                        
                                          Three Months ended June 30,    Six Months ended June 30,
                                              1997           1996           1997          1996
<C>                                        <C>            <C>            <C>           <C>
Revenues                                                                                           
     Battery sales                             $119,820        $73,565       $663,055      $401,533
     Project revenue                            740,367            938      1,204,863        61,090
     Interest income                             52,353         28,161         55,506        41,543
                                                912,540        102,664      1,923,424       504,166
Costs and expenses                                                                                 
     Manufacturing                              827,430        802,642      1,674,508     1,664,554
     Selling, general and administrative        661,472        799,044      1,225,654     1,558,691
     Research and development                   616,153        531,901      1,065,661     1,001,688
     Technology license and royalties            25,000         25,000         50,000        50,000
     Depreciation and amortization              477,273        526,911        955,960     1,041,907
     Interest expense                           168,615         91,109        221,901       359,394
     Loss on disposal of equipment                   --             --             --       171,895
                                              2,775,943      2,776,607      5,193,684     5,848,129
Loss before income taxes                    (1,863,403)    (2,673,943)    (3,270,260)   (5,343,963)
                                                                                                   
     Income taxes                                    --             --             --            --
                                                                                                   
Net loss                                   $(1,863,403)   $(2,673,943)   $(3,270,260)  $(5,343,963)
                                                                                                   
Net loss per common share                       $(0.45)        $(0.74)        $(0.81)       $(1.53)
                                                                                                   
Average common shares outstanding             4,096,964      3,635,403      4,017,882     3,494,239
                                                                                                   


See notes to condensed financial statements.
</TABLE>


<TABLE>
                               Electrosource, inc.
                 Condensed Statements of Cash Flows (Unaudited)
                                        
                                                                               Six Months Ended June 30,
                                                                                   1997          1996
<C>                                                                             <C>            <C>
OPERATING ACTIVITIES                                                                                     
  Net loss                                                                      $(3,270,260)   $(5,343,963)
  Adjustments to reconcile net loss to net cash used in operating activities:                            
     Equity instruments issued for consulting services                               21,600        32,400
     Depreciation and amortization                                                1,032,712     1,053,993
     Interest expense paid in Common Stock                                               --        58,304
     Non-cash interest expense (conversion discount)                                     --       141,750
     Loss on disposal of equipment                                                       --       171,895
     Non-cash accruals                                                               90,050       172,457
     Changes in operating assets and liabilities:                                                        
       (Increase) decrease in trade receivables                                   (518,457)       502,085
       Decrease in inventories                                                       37,526       185,061
       (Increase) decrease in prepaid expenses and other assets                     (8,145)        23,124
       Increase (decrease) in accounts payable and accrued liabilities                6,677     (527,643)
       Decrease in deferred revenue and advance payments on batteries             (162,223)            --
          CASH USED IN OPERATING ACTIVITIES                                     (2,770,520)   (3,530,537)
                                                                                                         
INVESTING ACTIVITIES                                                                                     
  Purchases of property and equipment                                              (30,438)     (226,552)
          CASH USED IN INVESTING ACTIVITIES                                        (30,438)     (226,552)
                                                                                                         
FINANCING ACTIVITIES                                                                                     
  Payments of notes payable and capital lease obligations                         (569,060)     (244,438)
  Proceeds from issuance of common stock, net                                       643,602     2,546,981
  Proceeds from issuance of convertible notes payable                             4,000,000            --
          CASH PROVIDED BY FINANCING ACTIVITIES                                   4,074,542     2,302,543
                                                                                                         
          INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                        1,273,584   (1,454,546)
                                                                                                         
  Cash and cash equivalents at beginning of period                                  367,861     2,083,032
                                                                                                         
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                       $1,641,445    $  628,486

See notes to condensed financial statements.
</TABLE>



Item 1.  Notes to Condensed Financial Statements (Unaudited)

NOTE A - BASIS OF PRESENTATION

The    accompanying    unaudited    condensed    financial    statements    have
been    prepared    in    accordance   with   generally   accepted    accounting
principles    for    interim   financial   information.     Accordingly,    they
do    not   include   all   of   the   information   and   notes   required   by
generally    accepted    accounting   principles    for    complete    financial
statements.     In    the    opinion    of    management,    all    adjustments,
consisting   of   normal   recurring   accruals,   considered   necessary    for
a   fair   presentation   have   been   included.    These   interim   financial
statements    should    be   read   in   conjunction    with    the    financial
statements    and    notes   thereto   included   in   the   Company's    Annual
Report   on  Form  10-K  for  the  year  ended  December  31,  1996,   and   are
not necessarily indicative of results for the entire year.

Certain    reclassifications   have   been   made   to   the   1996    financial
statements to conform with the 1997 presentation.


NOTE B - INVENTORIES

                                          June 30,     December 31,
                                            1997           1996
                                                                    
       Raw Materials                        $167,502        $151,841
       Work In Progress                       30,915          31,406
       Finished Goods                         13,292          65,988
                                            $211,709        $249,235


NOTE C - PROPERTY AND EQUIPMENT

                                         June 30,      December 31,
                                           1997            1997
                                                                   
       Office Equipment                  $  762,470      $  751,342
       Production and Lab Equipment       5,081,785       5,062,475
       Leasehold Improvements             1,290,197       1,290,197
                                          7,134,452       7,104,014
       Less: Accumulated depreciation   (2,776,395)     (2,316,995)
       and amortization
       Total Property and Equipment      $4,358,057      $4,787,019


NOTE D - CONVERTIBLE NOTES PAYABLE

Convertible Notes Payable consist of the following:



                                            June 30,     December 31,
                                              1997           1996
                                                                      
   Convertible Notes - 5%                   $4,000,000        $     --
   Convertible Notes - 10%                          --         250,000
                                             4,000,000         250,000
   Less Current Maturities                                    (250,000)
                                                   (--)
   Convertible Notes Payable - Long Term    $4,000,000        $     --



In  March  1997,  the Company entered into a  Note  Purchase  and
Option  Agreement and a Convertible Promissory  Note  and  Option
(the  "Agreements") with Corning Incorporated  ("Corning").   The
Convertible Note is for $4,000,000, is unsecured and  matures  on
March  26,  2002.  A $500,000 loan previously made by Corning  to
the Company was canceled and refinanced as part of the $4,000,000
Note.  Interest is payable at 5% per annum in cash or in kind  at
the  option  of the Company.  The conversion price is  $5.50  per
share.  The Company also granted Corning an option to purchase up
to  275,000  shares of Common Stock at $7.00  per  share  and  an
option to purchase up to 225,000 shares of Common Stock at  $9.00
per  share.  These options are exercisable until March 1999.  The
fair  market value of the options was estimated to be $1,462,500,
using the Black-Scholes Option Valuation model.  This amount  was
recorded  as  a  Debt  Issuance Cost and is  being  amortized  to
interest  expense  over the term of the  Note.   The  Company  is
working on various research and development projects with Corning
and is also discussing other potential business arrangements with
Corning.

In  April  1995, the Company issued $6,000,000 of 10% Convertible
Debentures  (the  "April  1995  Debentures")  resulting  in   net
proceeds to the Company of $5,375,000.  The April 1995 Debentures
were convertible into Common Stock at a conversion price equal to
80% of the average closing price of the Common Stock for the five
business  days immediately preceding such time as the  debentures
were converted and matured on April 12, 1997.  During 1995, April
Debentures  with  a  total principal amount  of  $5,750,000  were
converted  into  379,548 shares of Common Stock.   The  remaining
$250,000  of outstanding April 1995 Debentures matured  on  April
12, 1997, and were paid in cash by the Company.

During  1995 and the first quarter of 1996, the Company accounted
for   the  conversion  of  convertible  debentures,  issued  with
conversion rights at a discount to market, as sales of securities
and  treated  the discount as a cost of capital.  The  Securities
and  Exchange Commission subsequently announced that it  believes
such   discounts   should  be  treated   as   interest   expense.
Accordingly,  the Company restated its financial  statements  for
the  year  ended  December  31, 1995 to reclassify  the  discount
(generally 20-25%) as interest expense and record it as a cost of
borrowing.  The discount was amortized over the period  beginning
with  the  issuance of the debt to the first date that conversion
could  occur (generally 60 days).  The restatement increased  the
net  loss  for  the  year ended December 31, 1995  by  $2,603,250
($1.24 per share) and increased the accumulated deficit and  paid
in  capital by the same amount. This restatement is reflected  in
the  Company's  financial statements for the year ended  December
31,  1996 filed on Form 10-K.  The Company's financial statements
for the six months ended June 30, 1996, as presented herein, have
been  restated  to  reflect an additional  $141,750  in  interest
expense ($0.04 per share).


NOTE E - COMMON STOCK

In  January,  1997, the Company completed a private placement  of
Common  Stock  with certain of its executive officers  and  other
accredited  investors which raised net proceeds of $643,602,  net
of  advisory fees.  The offering was conducted in two parts.  The
terms  for  the  first  part,  in which  the  executive  officers
participated,  were  $6.56 per share of  Common  Stock  purchased
(80,897 shares) and one warrant at an exercise price of $7.56 per
share  for  each  dollar invested (530,883  warrants)  for  gross
proceeds  of  $530,684 to the Company.  The terms of  the  second
part  were  $5.25  per  share of Common Stock  purchased  (28,500
shares),  with  three warrants per share (85,500  warrants),  for
gross  proceeds  of  $149,625.   One-half  of  the  warrants  are
exercisable at a price of $5.25 per share and one half  at  $6.25
per share.  All warrants have a two-year term from date of issue.

In   April  1997,  the  Company  filed  an  amended  registration
statement  on Form S-3 for the sale of 127,500 shares  issued  to
Ally Capital Corporation ("Ally") as prepayment for capital lease
obligations  owed by the Company.  The shares  will  be  sold  by
Ally,  and  the  proceeds  will be  used  to  satisfy  the  lease
obligations (approximately $805,000 as of June 30, 1997).  If the
proceeds  from  the  sale of such shares are  not  sufficient  to
satisfy  the  lease  obligations due to  fluctuations  in  market
prices,  the Company will, on a one-time basis, issue  additional
shares  of  Common  Stock or pay cash to  Ally  to  make  up  the
deficiency.  Ally will retain any overage from the sale  of  such
shares  in excess of the lease obligations.  Upon payment of  all
lease  obligations, letters of credit for $663,000  which  secure
the  lease  obligations  will  be canceled  and  certificates  of
deposit  of  an  equal amount that collateralize the  letters  of
credit  will  be  released.  The 127,500 shares were  issued  and
outstanding as of June 30, 1997 and were valued at $867,000 based
upon  the  quoted  market price of the  stock  on  the  date  the
agreement  to  issue the 127,500 shares was signed.   The  shares
were  recorded as Subscriptions receivable at June 30, 1997 since
the lease obligation had not been satisfied at June 30, 1997.


NOTE F - CONTINGENCIES

In  1994, the Company signed a "Know-How License Agreement"  (the
"Agreement")  with Horizon Battery Technologies, Ltd.,  ("HBTL"),
of  Bombay, India, calling for the completion of several detailed
subordinate  agreements with the ultimate purpose to license  the
manufacture and sale of batteries in India.  The effectiveness of
the  Agreement was conditioned upon the subsequent  execution  of
these  six related agreements, none of which were executed.   The
Company believes, therefore, the Agreement never became effective
and  has no force or effect.  Separately in 1995, HBTL agreed  to
pay  the Company $250,000 for a Preliminary Design Review ("PDR")
for  a  potential  manufacturing  facility  in  India  which  was
required  to  complete  one of the subordinate  agreements.   The
Company  received  $100,000 from HBTL and completed  the  PDR  in
1995.  The remaining $150,000 was never paid by HBTL, in spite of
repeated demands by the Company.

In  September  1996, the Company received a demand from  HBTL  to
arbitrate  damage  claims for alleged breach  of  the  Agreement.
HBTL  claims damages of approximately $5,100,000 for its expenses
and  lost profits related to the Agreement.  The Company disputes
the  claim  for  damages and will vigorously defend  any  actions
taken by HBTL to pursue the claims.  The Company filed a petition
in  state  court  in Travis County, Texas, seeking,  among  other
things,  a  declaratory  judgment  that  HBTL  has  no  right  to
arbitration or monetary relief.  HBTL contested jurisdiction  and
removed  the proceedings to the U.S. Federal Courts.  The Federal
District Court to which the action was removed has ruled that  it
cannot exercise personal jurisdiction over HBTL and therefore has
no  power  to hear the case.  The Company asked for a re-hearing,
which was denied; the Company plans to appeal.  No liability  has
been  recorded in the financial statements at June 30, 1997,  for
this  uncertainty  as  management  is  unable  to  determine  the
likelihood  of  an  unfavorable outcome  of  this  matter  or  to
estimate the amount or range of potential loss should the outcome
be  unfavorable.   The  resolution of this matter  could  have  a
material adverse effect on the financial position of the Company.


NOTE G - EARNINGS PER SHARE

In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per
Share  ("SFAS 128"), which is effective for financial  statements
issued  for  periods  after December 15,  1997.   SFAS  128  will
require  restatement of prior reported loss  per  share  amounts.
Under  SFAS  128, the dilutive effect of stock options,  warrants
and  similar  securities is excluded in computing basic  earnings
(loss)  per share.  Since the Company has reported net losses  in
prior  periods, Statement 128 is not expected to have a  material
impact  on  the Company's prior reported loss per share  amounts.
The  method of calculating fully diluted earnings per share  will
remain essentially unchanged.


NOTE H - LIQUIDITY

The  Company has not generated sufficient cash flow from  battery
sales  and project revenue to fund operations for the six  months
ended  June 30, 1997.  During the six months ended June 30, 1997,
the  Company  sold  109,397 shares of  Common  Stock   (including
616,383 warrants with exercise prices ranging from $5.25 to $7.56
per  share)  which  generated net proceeds  of  $643,602  to  the
Company.  In March 1997, the Company received $4,000,000  in  the
form of a five-year unsecured convertible promissory note bearing
interest  at 5%, including 500,000 options at exercise prices  of
$9.00  per  share (225,000 options) and $7.00 per share  (275,000
options).   The  conversion price of the  convertible  promissory
note is $5.50 per share.

As  of July 31, 1997, the Company had approximately $1,100,000 of
unrestricted  cash available.  Management expects  the  level  of
battery  sales to increase beginning in late 1997 as the  Company
receives  an  increase in orders primarily from  those  currently
testing  the battery and from customers for which the Company  is
currently    refining   and   delivering   prototype   batteries.
Discussions  have begun with certain of these customers  for  the
manufacture   of  additional  prototype  batteries  for   further
testing.   However,  the timing and amount of  battery  sales  is
uncertain.  Revenue from project agreements is expected to remain
relatively  constant during the year.  Management  believes  that
sales from battery orders and services (combined with the release
of  restricted  cash  related to the Ally  lease)  will  generate
sufficient  funds  to  support its overall  working  capital  and
capital   expenditure  needs  through  1997;  however,   if   the
anticipated  battery  orders  are  not  received  in  late  1997,
additional  debt  and/or equity financing could be  necessary  to
sustain  operations.   Debt  and/or  equity  financing   may   be
necessary  in  early 1998 to fund working capital  needs  and  to
further  expand  and  automate the Horizon battery  manufacturing
facility  to  meet the demand of anticipated battery orders  from
customers currently testing prototype batteries.  The Company has
historically  been  able to raise funds on a  repeated  basis  to
sustain  operations; however there can be no assurance that  such
funding can be obtained on terms acceptable to the Company, if at
all.

The  Company's  Common  Stock is traded on  the  Over-the-Counter
Market  and is reported on NASDAQ.  In order to maintain  listing
by  NASDAQ,  the Company must maintain a minimum  $1  million  of
stockholders'  equity.   The Company is currently  in  compliance
with  this  requirement.   There can be no  assurance  that  this
minimum can be maintained throughout 1997 at the current level of
activity  without  additional  equity  financing,  conversion  of
existing  debt,  exercise of stock options or other  transactions
that  increase  shareholders' equity.  If  the  minimum  required
balance  is  not maintained, the NASDAQ may choose to delist  the
Common Stock of the Company from trading which would restrict the
liquidity of the Common Stock.  Ordinarily, before delisting, the
NASDAQ  would  provide the Company notice and an  opportunity  to
present and carry out a plan for compliance.



Item   2.  Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations (Unaudited)


Results of Operations:

Revenues.    The  Company  had  battery  sales  of  approximately
$120,000 and $663,000 for the three and six months ended June 30,
1997  as  compared to $74,000 and $402,000 for the three and  six
months ended June 30, 1996.  Approximately 78% and 70% of battery
sales   for  the  six  months  ended  June  30,  1997  and  1996,
respectively, were to Chrysler Corporation to fill orders  placed
in  accordance  with  terms  of  the  production  purchase  order
received  in  December  1995.  Due to  weakened  government  zero
emission  vehicle  mandates in California,  management  does  not
expect  sales  from  Chrysler in the near-term  to  reach  levels
originally projected.  Government zero emission vehicle  mandates
in  the state of New York which have recently been challenged and
upheld could result in an increase in battery orders beginning in
1998, primarily from Chrysler;  however, the timing and amount of
future  sales  to Chrysler is uncertain.  Current models  of  the
Horizon  battery  are being evaluated by certain  other  original
equipment  manufacturers  for potential  integration  into  their
products  in late 1997/early 1998.  Additionally, the Company  is
currently  refining several prototype battery designs  which  are
being  evaluated by customers.  Discussions have begun with  such
customers   for  additional  prototype  batteries   for   further
evaluation  and  testing.   Management  expects  that  sales   of
batteries will increase in late 1997 and early 1998 as  a  result
of  these  efforts.   However, the amount and timing  of  battery
sales to these potential customers is uncertain.

The  Company  had project revenue of approximately  $740,000  and
$1,205,000 for the three and six months ended June 30,  1997,  as
compared to $1,000 and $61,000 for the three and six months ended
June  30, 1996.  Project revenue in 1997 was derived from various
customers  with whom the Company is refining and/or manufacturing
evaluation  prototype  batteries  for  various  hybrid,  electric
vehicle,  starting and outdoor product applications  (Fiat  Auto,
SMH   Automobile,  S.A.  (SMH),  the  Defense  Advanced  Research
Projects  Agency (DARPA), Blue Bird Corporation, Black &  Decker,
Chrysler and others which remain confidential).  The majority  of
these projects are expected to be complete by the end of the year
at  which  time  customer  testing of  additional  prototypes  is
expected to intensify.  As a result of test results to date  with
certain  of  these customers, the Company is currently discussing
follow-on prototype battery orders by these customers for further
evaluation  and  testing in late 1997/early 1998.   Revenue  from
project  agreements  is  expected to remain  relatively  constant
during  1997.   Essentially all project revenue generated  during
1996  was from Chrysler for various environmental tests performed
on the battery.

Costs  and  Expenses.  Generally, total costs and  expenses  were
approximately the same for the three months ended June  30,  1997
compared  to the same period in 1996 and were lower for  the  six
months  ended June 30, 1997 compared to the same period in  1996.
During  1996,  management implemented cost  control  measures  to
conserve cash and reduce cash expenditures.  Personnel reductions
were  made  throughout  1996 primarily in manufacturing  and  the
Austin  and San Marcos facilities were combined into one location
in  the  fourth quarter of 1996 to reduce costs.  In  the  second
quarter of 1997, the Company began to add personnel primarily  in
the   manufacturing  department  due  to  the  increased  demands
associated  with  the  manufacture  of  prototype  batteries  for
projects.   The Company hired additional personnel  in  July  and
anticipates  modest  increases  in  personnel  primarily  in  the
manufacturing department to build additional prototype  batteries
and  production  models  for  orders which  are  currently  being
discussed    with   current   and   potential   new    customers.
Manufacturing  costs are expected to continue to  decrease  as  a
percentage  of  battery  sales  when  volume  production  begins;
however, the timing and amount of such orders remains uncertain.

Depreciation and amortization costs were lower for the three  and
six  months  ended June 30, 1997 compared to the same periods  in
1996 due to the write-off of approximately $525,000 for equipment
in 1996 which was no longer in use.

Interest  costs were higher in the quarter ended  June  30,  1997
compared  to the quarter ended June 30, 1996 due to the  interest
incurred on the 5% $4,000,000 convertible promissory note entered
into in March 1997 and the related amortization of $1,462,500  of
options  issued  to the noteholder which are being  amortized  to
interest  expense over the five year term of the note.   Interest
costs  were lower in the six months ended June 30, 1997  compared
to  the  six months ended June 30, 1996.  In late November  1995,
the  Company  obtained $3,780,000 of Convertible  Debt  financing
which  was  converted into Common Stock in early 1996.   Interest
costs  in  1996  included $141,750 related to the 25%  conversion
discount  from market on the Convertible Debt.  The discount  was
amortized over the period beginning with the issuance of the debt
to the first date that conversion could occur.

Liquidity  and  Capital Resources.  During the six  months  ended
June  30, 1997, the Company did not generate sufficient cash flow
from operations to fund its working capital needs.  Net cash used
in  operating activities was approximately $2,800,000 (down  from
$3,500,000 for the six months ended June 30, 1996).  In order  to
fund  operating  activities the Company sold  109,397  shares  of
Common  Stock  (and  616,383  warrants)  which  resulted  in  net
proceeds to the Company of approximately $640,000.  Additionally,
the Company received $4,000,000 in March 1997 from the sale of  a
Convertible  Promissory Note and Option to  Corning  Incorporated
("Corning").  The Note bears interest at 5% (payable in  cash  or
in kind) and matures on March 26, 2002.

As  of July 31, 1997, the Company had approximately $1,100,000 of
unrestricted  cash available.  Management expects  the  level  of
battery  sales to increase beginning in late 1997 as the  Company
receives  an  increase in orders primarily from  those  currently
testing  the battery and from customers for which the Company  is
currently    refining   and   delivering   prototype   batteries.
Discussions  have begun with certain of these customers  for  the
manufacture   of  additional  prototype  batteries  for   further
testing.   However,  the timing and amount of  battery  sales  is
uncertain.  Revenue from project agreements is expected to remain
relatively  constant during the year.  Management  believes  that
sales  from  battery  orders  and  services  (combined  with  the
anticipated release of restricted cash related to the Ally lease)
will  generate  sufficient funds to support its  overall  working
capital  and capital expenditure needs through 1997; however,  if
the  anticipated battery orders are not received  in  late  1997,
additional  debt  and/or equity financing could be  necessary  to
sustain  operations.   Debt  and/or  equity  financing   may   be
necessary  in  early 1998 to fund working capital  needs  and  to
further  expand  and  automate the Horizon battery  manufacturing
facility  to  meet the demand of anticipated battery orders  from
customers currently testing prototype batteries.  The Company has
historically  been  able to raise funds on a  repeated  basis  to
sustain  operations; however there can be no assurance that  such
funding can be obtained on terms acceptable to the Company, if at
all.

In  1994, the Company signed a "Know-How License Agreement"  (the
"Agreement")  with Horizon Battery Technologies, Ltd.,  ("HBTL"),
of  Bombay, India, calling for the completion of several detailed
subordinate  agreements with the ultimate purpose to license  the
manufacture and sale of batteries in India.  The effectiveness of
the  Agreement was conditioned upon the subsequent  execution  of
these  six related agreements, none of which were executed.   The
Company believes, therefore, the Agreement never became effective
and  has no force or effect.  Separately in 1995, HBTL agreed  to
pay  the Company $250,000 for a Preliminary Design Review ("PDR")
for  a  potential  manufacturing  facility  in  India  which  was
required  to  complete  one of the subordinate  agreements.   The
Company  received  $100,000 from HBTL and completed  the  PDR  in
1995.  The remaining $150,000 was never paid by HBTL, in spite of
repeated demands by the Company.

In  September  1996, the Company received a demand from  HBTL  to
arbitrate  damage  claims for alleged breach  of  the  Agreement.
HBTL  claims damages of approximately $5,100,000 for its expenses
and  lost profits related to the Agreement.  The Company disputes
the  claim  for  damages and will vigorously defend  any  actions
taken by HBTL to pursue the claims.  The Company filed a petition
in  state  court  in Travis County, Texas, seeking,  among  other
things,  a  declaratory  judgment  that  HBTL  has  no  right  to
arbitration or monetary relief.  HBTL contested jurisdiction  and
removed  the proceedings to the U.S. Federal Courts.  The Federal
District Court to which the action was removed has ruled that  it
cannot exercise personal jurisdiction over HBTL and therefore has
no  power  to hear the case.  The Company asked for a re-hearing,
which  was denied; the Company plans to appeal.  The Company  has
not  recorded a liability in the financial statements at June 30,
1997,  for  this uncertainty as management is unable to determine
the  likelihood of an unfavorable outcome of this  matter  or  to
estimate the amount or range of potential loss should the outcome
be  unfavorable.   The  resolution of this matter  could  have  a
material adverse effect on the financial position of the Company.

The  Company's  Common Stock is traded on the  Over-the  Counter-
Market  and is reported on NASDAQ.  In order to maintain  listing
by  NASDAQ,  the Company must maintain a minimum  $1  million  of
stockholders'  equity.   The Company is currently  in  compliance
with  this  requirement.   There can be no  assurance  that  this
minimum can be maintained throughout 1997 at the current level of
activity  without  additional  equity  financing,  conversion  of
existing  debt,  exercise of stock options or other  transactions
that  increase  shareholders' equity.  If  the  minimum  required
balance  is  not maintained, the NASDAQ may choose to delist  the
Common Stock of the Company from trading which would restrict the
liquidity of the Common Stock.  Ordinarily, before delisting, the
NASDAQ  would  provide the Company notice and an  opportunity  to
present and carry out a plan for compliance.

From  time  to  time,  the  Company may  publish  forward-looking
statements  relating  to  such matters as  anticipated  financial
performance,  business prospects, technological development,  new
products,   research  and  development  activities  and   similar
matters.   The Private Securities Litigation Reform Act  of  1995
provides a safe harbor for forward-looking statements.  In  order
to  comply  with the terms of the safe harbor, the Company  notes
that  a  variety  of  factors could cause  the  Company's  actual
results  and experience to differ materially from the anticipated
results or other expectations expressed in the Company's forward-
looking  statements.   When used in this  discussion,  the  words
"expects," "believes," "anticipates" and similar expressions  are
intended to identify forward-looking statements.  Such statements
are  subject to certain risks and uncertainties which could cause
actual  results  to differ materially from those projected.   The
risks   and   uncertainties  that  may  affect  the   operations,
performance,  development and results of the  Company's  business
primarily  include delays in shipment or cancellation of  orders,
timing of future orders, customer reorganization, fluctuations in
demand  primarily associated with governmental mandates  for  the
production   of  zero-emission  vehicles  and  the   ability   to
successfully  commercialize  the Horizon  battery.   Readers  are
cautioned  not  to place undue reliance on these  forward-looking
statements  which speak only as of the date hereof.  The  Company
undertakes  no  obligation to republish  revised  forward-looking
statements  to  reflect events or circumstances  after  the  date
hereof or to reflect the occurrence of unanticipated events.


                   Part II - Other Information


Item 1.   Legal Proceedings
     In  1994,  the Company signed a "Know-How License Agreement"
     (the  "Agreement") with Horizon Battery Technologies,  Ltd.,
     ("HBTL"),  of  Bombay, India, calling for the completion  of
     several  detailed subordinate agreements with  the  ultimate
     purpose to license the manufacture and sale of batteries  in
     India.   The  effectiveness of the Agreement was conditioned
     upon  the  subsequent  execution of six related  agreements,
     none   of   which  were  executed.   The  Company  believes,
     therefore, that the Agreement never became effective and has
     no  force or effect.  Separately in 1995, HBTL agreed to pay
     the Company $250,000 for a Preliminary Design Review ("PDR")
     for  a  potential manufacturing facility in India which  was
     required to complete one of the subordinate agreements.  The
     Company received $100,000 from HBTL and completed the PDR in
     1995.   The  remaining $150,000 was never paid by  HBTL,  in
     spite of repeated demands by the Company.

     In  September 1996, the Company received a demand from  HBTL
     to  arbitrate  damage  claims  for  alleged  breach  of  the
     Agreement.   HBTL claims damages of approximately $5,100,000
     for  its expenses and lost profits related to the Agreement.
     The   Company  disputes  the  claim  for  damages  and  will
     vigorously  defend any actions taken by HBTL to  pursue  the
     claims.

     On  December 19, 1996, the Company filed a petition  in  the
     District   Court   of  Travis  County,  Texas,   seeking   a
     declaratory judgment that the Agreement is not effective and
     HBTL has no right to arbitration or monetary relief and that
     HBTL  is  not  a  licensee of the Horizon technology.   HBTL
     contested  jurisdiction and removed the proceedings  to  the
     United  States  District Court for the Western  District  of
     Texas,  Austin Division Case No. A-97-CA-080-JN.  The  Court
     subsequently ruled that it has no personal jurisdiction over
     HBTL.  The Company asked for a re-hearing, which was denied,
     and plans to appeal.

     The  Company  has not recorded a liability in the  financial
     statements  at  June  30,  1997  for  this  uncertainty   as
     management  is  unable  to determine the  likelihood  of  an
     unfavorable outcome of this matter or to estimate the amount
     or   range   of  potential  loss  should  the   outcome   be
     unfavorable.   The resolution of this matter  could  have  a
     material  adverse effect on the financial  position  of  the
     Company.


Item 2.   Changes in Securities
     None
Item 3.   Defaults on Senior Securities
     None
Item 4.   Submission of Matters to a Vote of Security Holders
     At  the Company's Annual Meeting of Shareholders held on May
     22, 1997, the following items were voted on:

            PROPOSITION                  FOR     AGAINST  ABSTAIN  NON-VOTE
                                                                       
1. Directors                                                           
      Balzhiser, Richard E.           2,686,362  347,620    N/A       N/A
      Morton, Nathan                  2,686,362  347,620    N/A       N/A
      Semmens, Michael G.             2,544,880  347,742    N/A       N/A
2. Adopt the 1996 Stock Option Plan   1,162,080  147,927  193,895  1,538,090
3. Ratify Purchase of Company         1,158,060  144,886  205,931  1,536,115
Securities
4. Approve Ernst & Young as           2,626,057  178,440    5,085    232,410
independent auditors for fiscal 1997

Item 5.   Other Information
     None
Item 6.   Exhibits and Reports on Form 8-K
(a)  Exhibits
          27.                    Financial Data Schedule.
(b)  Reports on Form 8-K.
     Reports on Form 8-K filed during the quarter ended June  30,
     1997 and up to the date of this filing on Form 10-Q were:
                                                    None.



                           SIGNATURES

Pursuant  to the requirements of the Securities Exchange  Act  of
1934, the registrant has duly caused this report to be signed  on
its behalf by the undersigned thereto duly authorized.


Date:     August 14, 1997          ELECTROSOURCE, INC.



                                     /s/ Michael G. Semmens
                                   Michael G. Semmens
                                   Chairman, President
                                   and Chief Executive Officer



                                     /s/ James M. Rosel
                                   James M. Rosel
                                   Chief Financial Officer
                                   and General Counsel



                                     /s/ Mary Beth Koenig
                                   Mary Beth Koenig
                                   Chief Accounting Officer
                                   and Treasurer/Controller



                            Form 10-Q
               Securities and Exchange Commission
                     Washington, D.C.  20549


             _____________________________________

                          EXHIBITS TO
                           FORM 10-Q


      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
              THE SECURITIES EXCHANGE ACT OF 1934


               For the quarter ended              Commission file
               June 30, 1997                 Number 0-16323


        ________________________________________________


                      ELECTROSOURCE, INC.
     (Exact name of Registrant as specified in its charter)


             Delaware                    742466304
   (State or other jurisdiction(I.R.S. Employer Identification
No.)
of incorporation or organization)

     2809 Interstate 35 South
        San Marcos, Texas                  78666
(Address of principal executive offices) (Zip Code)


            Registrant's telephone number, including
                   area code:  (512) 753-6500

  Securities registered pursuant to Section 12(b) of the Act:

                              None

  Securities registered pursuant to Section 12(g) of the Act:

            Common Stock, par value $1.00 per share


                        INDEX TO EXHIBITS

(a)  Exhibits.

          27.                    Financial Data Schedule.