So, I'd argue that smaller batteries aren't smaller scale. A lot of people are chasing autos right now. However, that's not the majority of battery use. I think part of the issue is that your smartphone's battery is "good enough". By good enough, I mean that while people complain about battery life, it doesn't stop them from purchasing the devices. So, a smartphone that gets 2x battery life isn't the same draw. In fact, based on the Anandtech review of the iPhone 5, some phones get substantially greater use times when compared to other quite popular models.

By contrast, the 60-ish mile range of a Nissan Leaf just doesn't cut it in more ways than one (unlike a phone, it can't be easily charged in loads of places, unlike a phone that could charge 50-80% in an hour, the car really needs a third of a day, etc.). So, a better battery for a car might become game-changing while a better battery in a power tool or phone might just be nice or luxurious.

Still, there are a lot more applications for batteries in the non-auto world. Premium laptops could be sold with them or as aftermarket add-ons, phones, tools.

Not to beat a dead horse, but in hindsight it was quite clear that no established auto maker would allow themselves to be single sourced on a critical component - no responsible business could operate that way. To pursue the auto market would have required being the auto maker, selling out to one of the auto makers, or allowing the auto maker to multi-source your technology. And, in A123's defense, they did create their own plug-in Prius cars (google Hymotion), but Toyota didn't like it, it was an expensive add-on to an already expensive car ($10k I think), and took up a bunch of trunk space.

It's also possible that it would have been more successful in more niche areas. To talk about software for a moment, everyone wants to make Facebook, Google, Weebly, Reddit, etc. It's the kind of project that people consider cool. However, it means that a lot of smart people just ignore things that companies need (those enterprise-y things) as dull - and those enterprises often end up with poor tools in those areas. It's possible that A123 could have worked on delivery vehicles or other vehicle fleets.

Consumers are hard to please. If I want to go from Boston to New York, I want to be able to go with the best convenience. Cargo doesn't tend to give a crap if it's delayed half an hour. So, for UPS' local delivery trucks, batteries might work nicely. Batteries tend to better with frequent starts and stops than combustion engines. UPS could have battery swapping stations to remove one battery pack for a freshly charged battery pack in a way that might be hard for consumers. UPS could easily make the calculation that the cost savings could mitigate 15 minute delays.

I don't mean to say that it would work for UPS. However, when we look at things like LNG or full ethanol or other alternative fuels, they tend to be more widely used in fleets that can manage the infrastructure to handle them. However, those enterprise-y things aren't the things that grab headlines and change the world. You don't get the feeling of "everyone knows what I do and I'm having an impact on the world" from helping UPS to cut its fuel budget by 15%. You get that feeling from doing very public, very consumer things.

For example, by some estimates (US DOE), cars use about 40% more energy than passenger rail. So, everyone who likes green things wants more passenger rail. However, then we take a look at freight. Trucked freight uses over 1000% more fuel than freight rail. So, if one wants to reduce energy usage (and pollution) the most, moving freight from truck to rail is much more important than moving a passenger from car to rail. It's also more convenient since freight often doesn't mind waiting an hour or two for a transfer in the way that passengers want convenience. But freight rail is the behind-the-scenes logistics and doesn't have the same celebrity factor.

So, politically, we talk a lot about new passenger rail and how it's wonderful and green. However, consumers are hard to please - you have to really make sure that something works with changing consumer patterns, that it is convenient for their lives, etc. Enterprises can often be satisfied more easily. A consumer might get annoyed that a battery exchange station takes 10 minutes while a UPS driver is happy that they have a 10 minute break. A consumer doesn't want to wait a couple hours for a transfer while freight is generally happy to idle.

So, it's possible that even within the automotive sphere, going toward the enterprise side of things could work out better. It's not as cool, but it can also be a stepping stone to something wider.