General Motors and partner Shanghai Automotive have agreed to work on developing and commercializing fuel-cell vehicles, citing the need to improve energy security and reduce pollution as China moves into the auto age.
The agreement, signed Saturday at the headquarters of Shanghai Automotive Industry Corp., expands on a plan announced earlier this month by GM to cooperate with state-run SAIC in building a hybrid bus to test run in Shanghai.
The recent surge in oil prices has driven home the need to develop vehicles that run on alternatives to traditional gasoline and diesel, and Shanghai's leaders have pledged support for research and development of such vehicles, GM Chairman Rick Wagoner said.
"This is in support of the long-term strategic plan of the Chinese government to promote a sustainable automotive industry," said Wagoner. "It's a big enough problem that it requires support from the government."
Booming demand has turned China into the world's fastest-growing auto market, but the explosion in auto use has added to energy shortages and worsened already severe air pollution in many cities, including Shanghai.
The city recently hosted Challenge Bibendum, an exhibition on energy-efficient, environmentally friendly cars that highlighted its interest in developing such new technologies.
"If we still go further in the traditional way, shortages of resources and environmental damage will only worsen," said Shanghai's vice mayor, Hu Yanzhao.
The new agreement calls for GM and SAIC to codevelop a demonstration vehicle using fuel-cell technology, based on GM's HydroGen3 vehicle, which is already being used in demonstration programs in Tokyo and Washington, DC.
A two-year demonstration of the vehicle, beginning in early 2005, is "designed to showcase the benefits of fuel cell vehicles in real-life applications," GM said in a statement.
Fuel cells, which fuse hydrogen and oxygen to produce electricity, heat and water, are considered the ultimate power source because of their efficiency and lack of pollution.
The biggest challenges are in cost and the lack of infrastructure to fuel and maintain such vehicles, which can cost $1 million or more apiece to build, industry sources say.
China is stepping up efforts to develop such "clean vehicles" ahead of the 2008 Olympics in Beijing and the 2010 World Expo in Shanghai.
GM is among many automakers beginning to nurture the market here for such new technologies.
DaimlerChrysler AG says it plans to test three hydrogen fuel-cell buses in Beijing next year. Toyota Motor Co. intends to assemble and sell its gasoline-electric Prius hybrid in China.
"It's going to be a competitive market," Wagoner said.