Honda and Volvo are both planning to launch clean-energy cars in China, joining a growing crowd of domestic players developing such models to take advantage of expected generous government incentives.

From leading Chinese auto group SAIC Motor Corp to rising star Geely Automotive Holding, indigenous players were showing off a host of new green vehicles at the Beijing autoshow that started on Friday in the Chinese capital.

The companies, domestic and foreign alike, are scrambling to stake out leading positions in hybrid and electric vehicles that meet tougher emission standards.

Honda Motor Co joined the fray when it said it would introduce a hybrid model under its premium Acura brand in China within three years, and its Insight and CR-Z hybrids from 2012.

Ford Motor Co's Volvo unit, which is being acquired by the parent of Geely, said it planned to sell its c30 electric cars in China.

For investors, the basic picture is clear, the government does want to move away from dependence on oil and doesn't want to repeat what's happened in America: we've become addicted to oil, Michael Dunne, an auto consultant, told Reuters Insider in an interview on the eve of the auto show's opening.

Where things get sketchy are in the details: is the technology ready to move to electric cars, and who's going to pay the subsidies and the investments in infrastructure that are necessary to get e-vehicles going.

Among domestic players, Dunne mentioned BYD Co, invested by Warren Buffett's Berkshire Hathaway, and SAIC, as two leaders in the field because of their access to cutting-edge technology.


China's fifth largest carmaker, Beijing Automotive Industry Holding Co (BAIC) is also getting in on the act, with plans to invest 3.7 billion yuan ($540 million) in the field, developing hybrid, pure-electric, and plug-in hybrid vehicles, said President Wang Dazong.

There are big opportunities for growing EV market in these five or 10 years, said Shouichi Matsumoto, senior general manager of Dongfeng Motor Co, the 50-50 venture between Nissan Motor and Dongfeng.

I think China will become one of the most important markets for electric vehicles. If we use clean electric power like wind or solar, electric vehicles will be clean. Not in three or five years but maybe in 10 or 20 years, electric vehicles will be majority in China, he said.

But the road for low emission, alternative fuel vehicles in China is a long one. Sales of Toyota's Prius, the world's best-known green car, numbered just 300 in China last year, when it overtook the U.S. as the world's largest auto market.

The buzz around electric cars came as carmakers boosted their overall sales targets for China this year on turbocharged sales fueled by tax incentives from Beijing.

China's car sales have defied falling sales in the rest of the world and have continued to show strong growth this year, up 76 percent in the first three months, according to government data.

Industry watchers were initially predicting 10-15 percent growth for this year, but many have started revising those expectation upwards to the 20 percent range and higher.

Major carmakers ranging from Germany's Bayerische Motoren Werke AG (BMW) to Japan's Mitsubishi Motor and luxury carmaker Lamborghini, part of Volkswagen, were boasting heady China growth targets for this year, as the market continues to boom.

(Additional reporting by Fang Yan, Ran Kim, Michael Wei, Irene Preisinger and Kevin Krolicki; Editing by Chris Lewis and Lincoln Feast)