China is going green, and hybrid power has proven extremely popular in China's automotive industry recently.

A slew of industry players, from General Motors (GM) to small Chinese manufacturer Maple, have announced they will develop and produce hybrid vehicles for the oil-hungry Chinese market. Petrol-electric technology is said to be cleaner than conventional petrol engines.

GM, the world's top automaker, and Chinese partner Shanghai Automotive Industry Corp (SAIC), agreed late last month to jointly develop and produce hybrids in China. The partnership plans to manufacture large hybrid buses for Shanghai's mass transportation system by 2010. They will also begin commercial passenger car production by 2008.

Last month Maple, which is the Shanghai-based unit of privately owned domestic auto manufacturer Geely, produced the Hysoul 305, a 1.8-litre demonstration hybrid car.

Xu Gang, Maple's chairman, says the company plans to begin commercial hybrid car production in 2008, with initial output expected to reach between 5,000 and 10,000 units a year.

SAIC, China's second biggest automaker, says it plans to start to produce a small volume of hybrid cars in 2008 with partners GM and Germany's Volkswagen. Its annual production capacity should reach 50,000 units by 2010.

SAIC's venture with Volkswagen, the sole auto partner of the Beijing 2008 Olympic Games, is expected to produce 500 Touran hybrid vans for the international sporting event.

Toyota, the world's second biggest automaker, will produce the 2.0-litre Prius hybrid sedan with leading Chinese manufacturer First Automotive Works Corp, by the end of this year in Northeast China's Jilin Province. This will make Toyota the first global manufacturer to introduce hybrid cars in China.

Chery Automobile, an upstart Chinese automaker in East China's Anhui Province, is also developing hybrid cars. It plans to launch its first model next year.

Analysts say rising fuel price are contributing to the huge growth potential of hybrid vehicles in China. Hybrids are simply more fuel efficient cars.

Hybrid engines, however, are still much more expensive, which is the biggest obstacle facing the popularization and growth of hybrid vehicles.

It would take the average driver seven to eight years to recover his or her investment in a standard hybrid vehicle, says Michael Dunne, president of Automotive Resources Asia Ltd, a time period most consumers would balk at.

So why are so many manufacturers rushing to introduce hybrids in China?

Analysts say they just want to show off their technological prowess and build an environmentally friendly image, at least over the short term, when costs are unlikely to significantly decrease.

"If hybrids are to really take off (in China), they would need a shot in the arm from the government in two ways: Either the central and local governments purchase fleets of hybrids to serve as taxis, or they offer tax breaks to people who buy hybrids or both," Dunne tells China Business Weekly.

"Without this kind of support, hybrids are likely to be bought by a small minority of people who are ultra-conscientious about the environment, or who like to feel good about positively contributing to society."

Rick Wagoner, GM's chairman and chief executive officer (CEO), says hybrids are a mid-term solution to hydrogen-powered fuel cells from renewable resources.

China is expected to play a key role in helping GM achieve its target to become the world's first company to profitably sell 1 million hydrogen fuel cell vehicles, Wagoner says.

"To make this happen, we need to bring down costs and build the necessary infrastructure and the best way to do that is by business and government working together," he says.

SAIC President Hu Maoyuan says the group will do everything it can to cut costs for customers who buy hybrid vehicles.

"We intend to produce hybrid vehicle parts to supply global automakers. This will enhance economies of scale and slash costs," Hu says.

SAIC and GM plan to jointly start commercial production of thousands of hydrogen fuel cell vehicles by 2010.

SAIC is also looking forward to government policy support to encourage customers to buy hybrid or hydrogen fuel cell vehicles, Hu says.

Maple's Xu Gang suggests that the government slash taxes for customers who buy hybrid vehicles. Maple hopes to sell more than 20,000 cars this year, and over 50,000 units in 2007, Xu says.

Rapidly growing vehicles sales in China are boosting the nation's oil demand significantly. The State Council Development Research Centre predicts that automobile oil consumption in China will account for two-fourths of its total annual oil demand by 2010. That figure is expected to climb to almost three-fifths by 2020.

China's oil demand is expected to surge to 360 to 390 million tons a year by 2010, and to 400 to 500 million tons by 2020. This will jump from nearly 300 million tons last year, according to the centre.

(China Daily 11/07/2005 page6)