General Motors (GM) and Chinese partner Shanghai Automotive Industry Corp (SAIC) on Saturday signed a joint development and commercialization agreement on hybrid and fuel cell vehicles in oil-hungry China.

The two companies will co-develop a demonstration vehicle using the latest fuel cell technology, building on GM's Hydrogen3 fuel cell vehicle, according to the understanding.

The two-year demonstration will start in Shanghai - where GM, has its flagship joint venture with SAIC -the first quarter of next year.

As part of the clean energy vehicle effort, GM and SAIC said on October 11 the US carmaker's Allison Transmission Division and the Chinese firm's bus joint venture with Swedish Volvo Group will jointly develop hybrid transit buses.

GM executives said the vehicle programme is not part of the two sides' plan to invest more than US$3 billion in China to introduce new products and build additional production capacity over the next three years, which was released in June.

"Our near and mid-term solutions include hybrid, which we believe has exciting potential... Yet we see hybrid as a bridge to hydrogen-powered fuel cells from renewable resources. We see this as the ultimate solution for taking the motor vehicle out of environmental equation, guaranteeing energy security," said Rick Wagoner, chairman and chief executive officer of GM.

"GM is striving to have commercially viable technology available by the end of this decade. Our goal is to become the first automaker to profitably sell 1 million hydrogen fuel cell vehicles. We believe China can and will play a key role in making this possible," Wagoner said.

"Yet there are many challenges that must be overcome before we achieve a hydrogen-based economy, such as reducing costs and building the necessary infrastructure," he added.

SAIC Chairman Chen Xianglin said that the two companies expect to demonstrate "phased results" of their clean energy vehicle programme in 2008 or 2010.

To develop clean energy vehicles would appear to be an impressive task for the auto industry, especially in China which is depending more heavily on oil imports because of its fast-growing economy.

China imported 76 million tons of oil during the first eight months of this year, accounting for 40 percent of its total demand.

The nation's full-year oil imports are forecast to exceed 100 million tons.

Other foreign automakers have also showed great interest in clean energy vehicle production in China.

Japan's Toyota clinched a deal with Chinese partner First Automotive Works Corp (FAW) in September to start to produce its Prius hybrid cars next year in Changchun, capital of Northeast China's Jilin Province.

Toyota and FAW are also in negotiations to introduce the Japanese firm's hybrid engine technologies into FAW's own car models.

Germany's Volkswagen is keen to promote its advanced diesel engines, more efficient than gasoline engines, in China.

Volkswagen began producing diesel-powered cars in 2002 in its joint venture with FAW, making it the first foreign automaker to producing diesel cars in China.

"We are still optimistic, bullish and confident in China's auto industry, although vehicle sales growth has slowed down recently," Wagoner said.

Sales of vehicles made in China grew by 18.4 percent year-on-year to 3.7 million units in the first nine months of this year.

The growth rate was down 34 percent last year.

Growth of passenger car sales during the period declined to 20.7 percent from 75 percent last year.

GM is one of a few foreign automakers still enjoying robust sales growth in China this year.

The company's sales from January to September this year were equivalent to the total of last year, almost 387,000 vehicles, according to Phil Murtaugh, chairman of GM China Group.

(China Daily November 1, 2004)