Japan's Honda Motor Co plans to start producing electric cars in China as early as next year, the boldest step so far by a global automaker to tap as yet unproven demand for green cars in the world's largest auto market.

Honda, Japanese rival Toyota Motor Co, Ford Motor Co and their local partners are all looking to electric and low emission vehicles as a way to tackle stricter emissions standards being introduced around the world.

While car makers are bullish about the future of the green vehicles in China, questions remain over the country's use of coal to generate the majority of its electricity, consumer perceptions about the safety and convenience of electric cars and not least, the Beijing's plans and policies for the electric-hybrid industry.

Honda wants to produce electric cars in China in 2012, Chief Executive Takanobu Ito said at the Shanghai Auto Show on Tuesday, adding that the car maker has reached a deal with the city of Guangzhou and the Guangzhou Automobile Group Co to conduct demonstration testing of EVs.

This (test) will verify how practical and convenient the EVs Honda is currently developing will be within the city of Guangzhou and the ideal infrastructure for society toward achieving the widespread use of EVs, Ito told a news conference.

At a roundtable discussion at the show, Honda's China chief, Seiji Kuraishi, was asked about the significance of introducing an electric car in China.

For Honda, as a company that is promoting low-CO2 emission vehicles and green technology, we want to build a brand around that in China, he said. The CO2 issue is a very serious one in China and we think electric cars will be one solution.

But, he added, Whether or not it will work as a proper business is a separate matter right now.

No foreign mass automaker sells pure electric vehicles in China, where sales of new-energy cars are estimated to be in the hundreds or thousands.

Ito, speaking alongside Kuraishi, said Honda did not have a specific target for EV sales in China and Kuraishi added that he wanted to produce EVs, albeit in small volumes, with both of Honda's joint venture partners, Dongfeng Motor Group Co Ltd and Guangzhou Automobile Group Co Ltd.

Kuraishi said it was not clear how the Chinese government's incentives policy on EVs will evolve. While the government had at one point been seen as likely to aggressively promote pure, battery-run EVs, it was gradually warming up to hybrid technology, Kuraishi said.

I think the government has concerns over the quality of motors, durability, and safety issues when it comes to EVs, Kuraishi said.

Those safety issues were highlighted last week when a Zotye Langyue EV taxi caught fire in Hangzhou.

Guangzhou Automobile, China's No.6 domestic automaker, plans to sell 200,000 new energy cars by 2015, the company said in a statement issued at the Shanghai Auto show.

Guangzhou Auto, which is also a partner of Toyota Motor Co and Fiat SpA, is seeking a listing on the Shanghai stock exchange through a merger with its unit, GAC Changfeng Motor Co Ltd.

It plans to convert Changfeng, which makes vehicles with Japan's Mitsubishi Motors Corp and other brand names and provides automobile components, into a 50/50 joint venture with Mitsubishi.

Dongfeng Motor Group, China's No.2 automaker, plans to launch its first electric cars in China next year, targeting sales of 100,000 by 2015, president Zhu Fushou told Reuters.

Both Toyota and Ford Motor Co are also stepping up their green car businesses in China. Ford said on Monday that it was bringing a test fleet of electric vehicles to China later this year, including its Fusion hybrid. Toyota is planning to develop and produce energy efficient cars and components in the country.

Other moves in the green car field include German automaker Daimler, which is talking to partners and Nissan Motor about working together on fuel cell technology, its head of R&D told Reuters in an interview.

We are in a concrete product development phase, so therefore we are discussing concrete projects on the fuel cell side, bundling resources so that we could come faster to the market, Thomas Weber, board member for research and development at the maker of Mercedes-Benz and Smart cars, said at the show.

The partners could work together on the stacks where energy is produced inside the fuel cell, Weber said, adding fuel-cell cars could become a reality for the mass market by 2015. The technology is there -- in 2015 latest we will start volume production.

EV CHALLENGES

As global car makers rush to tout their green credentials by introducing hybrid and electric vehicles at venues like the Shanghai Auto Show, one topic often overlooked is the source of electricity that powers those vehicles. And in China, that source is almost invariably coal, one of the most polluting fuels used in the world.

Another challenge facing the industry in China is setting up the infrastructure to allow consumers to easily charge their vehicles.

A recent survey by the Synovate market research group showed green cars continue to fight an uphill battle in consumer perceptions.

The major barriers that prevent Chinese car consumers from opting for this new energy proposition refer to concerns regarding the battery, costs and product experience, the survey showed.

Still, auto makers remain upbeat about the outlook for China's EV market.

We see the new-energy vehicle opportunity here is probably greater than in many other countries, said BMW's sales chief, Ian Robertson. There is a clear agenda that is a desire on the part of the government to develop technology, component suppliers with the expertise and volume capability with which to be successful.

The consumer will be attracted by incentives, by tax opportunities in which to take on board new energy vehicles. We see China as playing a very active role in this respect, so much so that China could be a game changer in this regard, Robertson said.

(Editing by Matthew Driskill)

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