Lexus GS450h

China’s Chery Automobile unveiled a hybrid version of its A5 sedan at the 2006 Ninth Beijing International Auto Exhibition.

China is the world’s third largest car market, and is projected to overtake Japan by 2010. And by 2030, China could have more highway vehicles than the United States currently has, according to a report issued last month by the U.S. Department of Energy.

The rise of the Chinese automobile could have a devastating environmental impact. But some industry observers see a glimmer of hope, if China can leapfrog global competitors by producing cheaper and much more fuel-efficient vehicles. “The potential rewards are so huge for the Chinese government,” said Lisa Margonelli, author of Oil on the Brain, when we spoke with her a few months ago. “Because the government does central planning, it can actually imagine doing something like that, and it can imagine the rewards.”

Gal Luft, executive director of the Institute for the Analysis of Global Security, looks at the rise of affordable super-efficient vehicles from China—and sees warning signs for Detroit. In an essay entitled “China’s Sputnik,” published in the San Francisco Chronicle last week, Luft writes:

China is now on track to provide our auto and energy sectors with what the Soviets provided our weapons and space industries—a jolt. If a Chinese Sputnik is what’s needed to awaken Detroit and Congress to boost investment and speed up the commercialization of vehicles that run on clean and cheap non-petroleum fuels, then so be it.

Luft points specifically to the potential of Chinese-made plug-in hybrids that could allow motorists to drive up to 40 miles exclusively on electricity. He believes that Chinese automakers could offer plug-in hybrids below the price of American non-hybrids. Luft acknowledges that current Chinese cars continue to fail U.S. safety and environmental standards, and that it could take a decade or more for the Chinese auto industry to become competitive.

But the evidence is mounting that Chinese automakers are on their way, and that they are interested in building products less reliant on petroleum. In March 2007, a panel of the Chinese Academy of Sciences recommended specific strategies, including adoption of new automobile powertrains that are more fuel efficient and use diverse energy sources. The report states, “Priority should be given to zero-emission, electric drives.” Somebody in the U.S. government is apparently paying attention. In September 2007, the Department of Energy signed a five-year agreement with China’s Ministry of Science and Technology to promote large-scale deployment of next-generation vehicle technologies in both countries. The cooperative efforts will focus on electric, hybrid-electric, fuel cell, and alternative fuel technologies.

Despite the signing of the agreement, Detroit’s efforts to dramatically increase efficiency and reduce emissions, and China’s plans for major breakthroughs, both remain in the realm of theory. “If Chinese automakers were to leapfrog in terms of producing very cheap cars with no greenhouse gas emissions, that could really change things,” said Margonelli. “Will they do it? I doubt it. It’s awfully hard to pull that off.”