The company, a partner of Volkswagen and General Motors (GM) in China, plans to begin commercial production of hybrid-powered cars and buses under its own and foreign brands before 2008, SAIC said in a statement.

Zhu Xiangjun, a spokesperson for SAIC, told China Daily its annual output of hybrid-powered vehicles will be "several thousand units" during the period and will increase to "tens of thousands" before 2010.

Hybrid technology means petrol and diesel engines can power vehicles and generate electricity simultaneously, which can also power vehicles, helping lower oil consumption and exhaust emissions.

SAIC also said it will start small-volume commercial production of hydrogen-powered fuel-cell cars before 2010.

Fuel cells convert hydrogen into electricity to power the car, and only emit water.

As part of efforts to attain its goals, SAIC on Friday clinched a strategic collaboration deal with China's two renowned engineering academies - Shanghai Jiaotong University and Tongji University, which is also located in the city.

Last November the company signed a joint development and commercialization agreement with GM on hybrid and fuel-cell vehicles in China, mainly using the United States auto giant's technology.

GM, which runs four car joint ventures with SAIC, said previously China will play a key role in its drive to become the first automaker to sell one million hydrogen-powered fuel-cell vehicles in the world. GM is striving to start commercial production of fuel-cell vehicles by the end of the decade.

Analysts say hybrid and fuel-cell vehicles have huge growth potential in China as a result of the nation's worsening oil shortage and auto demand, but there are still challenges, such as reducing costs and building the necessary infrastructure.

Many other Chinese and foreign automakers are preparing to produce hybrid-powered cars in the oil-hungry nation.

Toyota said it will start making the 1.5-litre Prius later this year at its joint venture in northeastern Jilin Province with First Automotive Works Corp, another leading Chinese firm.

Maple, the Shanghai-based unit of China's privately-owned car maker Geely, also plans to begin commercial production of own-brand hybrid-powered cars in 2008. The company, which struck a deal with Tongji University last month for hybrid-powered car development research, aims to manufacture 5,000 to 10,000 hybrid cars a year initially and expects such cars will account for half of its total annual sales in the long term.