GM to sell hybrid cars in China

General Motors will begin selling hybrid cars in China from 2008 – making it the latest multinational automotive company to plan the launch of alternative energy vehicles for the fast-growing Chinese market.

GM will build hybrid cars in collaboration with its local partner Shanghai Automotive Industry Corporation, the US carmaker’s chief executive Rick Wagoner revealed on Monday.

Toyota began selling its Prius petrol-electric hybrid car in China at the start of this year and Volkswagen has said that it will introduce hybrid vehicles into China by 2008, in time for the Beijing Olympics.

Some industry analysts believe that China could become one of the main driving forces behind the development of alternative energy vehicles, because the country does yet not have the expensive gasoline infrastructure more developed economies have built up.

Moreover, China’s mounting energy needs mean that it has a huge incentive to promote energy sources other than oil.

During a visit to Shanghai on Monday, Mr Wagoner test-drove the group’s Sequel car, which uses hydrogen fuel-cell technology but is many years away from being commercially available.

He said that the company had reduced the cost of making the Sequel by 12 times over the last five years, but still needed to reduce it by a further seven times in order to make it viable.

Executives at the US auto giant would not say how many hybrid cars the group would initially look to sell in China, or which brand name it would use.

They said that the early models in the China market would be based on GM’s technology and would then be adapted for Chinese customers at the joint venture research centre it operates with SAIC in Shanghai.

Mr Wagoner said that GM would continue to invest in China despite the cost pressures the group was facing and was confident that the group’s sales would continue to outpace the already rapid pace of growth seen in the auto sector.

In the first three quarters of the year, GM’s sales in China grew at 36.7 per cent, cementing its position as the second largest carmaker in a market which is growing at around 20 per cent a year.

Mr Wagoner said GM would consider at some stage using China as an export base for making cars for developed markets, but added that the company was working flat out at the moment just to satisfy demand in the Chinese market.

He also said during his visit to China that the group was confident of reaching a deal with auto parts maker Delphi, its ailing former subsidiary, and its creditors over labour costs.

GM’s contribution was likely to be at “the lower end” of the $6bn-$7.5bn range that the company had already disclosed.

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