China, the world's No 2 vehicle market and oil consumer, is scouting around for fuel-efficient cars.
A battery of automakers, from global names like Toyota and General Motors to indigenous companies like Chery and SAIC Motor, are conducting research on hybrid and fuel-cell cars.
Hybrid cars have a conventional combustion engine as well as an electric motor to improve mileage. Fuel cells convert hydrogen into electricity to power the car and the only thing they emit is water.
Germany's Volkswagen, however, is betting on diesel-powered cars, although it also plans to make hybrids next year in Shanghai for the Beijing Olympic Games.
The top car seller in China holds diesel cars as the "most practical" solution to the nation's energy and environmental problems. Modern diesel engines won't increase car prices and can save fuel consumption by 40 percent compared with petrol cars with the same engine capacity, the company said.
"Only with the approach to provide environmentally friendly technology to everyone and not just a few, can a positive effect on the environment be achieved," said Winfried Vahland, president of Volkswagen China Group.
Diesel engines are part of Volkswagen's plan to spend US$600 million making its latest engines and gearboxes in China to cut fuel consumption and emission of its locally made cars by over 20 percent by 2010 from last year.
The plan is in response to China's goal to cut energy consumption per unit of gross domestic product by 20 percent by 2010 from 2005.
Vahland said the firm expects diesel cars to take 5-10 percent of China's passenger car market by 2010 from a negligible ratio last year.
Volkswagen, the sole company making diesel cars in the country, started production of such vehicles at its joint venture with First Automotive Works Corp five years ago. Last year, it sold more than 20,000 diesel cars in China, up from 16,000 units in 2005. Its overall China sales grew by 24.3 percent to 711,298 cars.
Feng Fei, an industrial economist at the State Council Development Research Center, said diesel cars should have a much bigger market share than hybrids, fuel cells and other new-energy vehicles.
"The modern diesel car should also be seen as a new-energy option and China should speed up introduction of such vehicles," Feng said.
He predicted diesel cars will occupy 4 percent of China's passenger car market by 2010 and 20 percent by 2020.
But diesel cars still need to clear major hurdles to take off in the country, including persistent constraints imposed on them and the low quality of diesel fuel in many cities.
Feng said hybrids will be put into volume commercial production in 2010 and fuel cells in 2020 as both are very expensive to develop. Hybrid cars will only account for 1 percent of the car market in China by 2010, he said.
Toyota began producing its Prius hybrid cars here at the end of 2005. But it only sold 2,152 units last year because of its high price. In Beijing, a 1.5-liter Prius retails between 280,000 and 290,000 yuan.
Michael Dunne, president of Automotive Resources Asia Ltd, a consultancy under JD Power & Associates, said fast growth of hybrids in China needs tax breaks for buyers. Otherwise, Dunne said, hybrids will only be bought by a handful of people "ultra-conscientious about the environment".
(China Daily May 25, 2007)