Major Benefit

The major benefit for JAC is cash, analysts said.

JAC made significant investment in its passenger car business that will take some time to recoup, while HK Motors has advantages in managing capital, said Zeng Zhiling, an independent automotive analyst based in Shanghai.

JAC's sedan business is estimated to remain in the red this year and become profitable in 2011, according to a report by Huatai United Securities.

JAC would prefer to have partners to share the high risk of investment in developing new-energy vehicles, Zeng said.

While the race is on to develop various forms of new, low and hybrid energy vehicles, serious questions remain whether many technologies are ready for commercial production, according to analysts.

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Reports by Industrial Securities and Nanjing Securities said the innovative technology needed will be brought in by Hybrid Kinetic Group and its motor unit, yet other analysts note the group's expertise is in capital management, not the mature technology needed to mass produce clean vehicles.

The partnership will need support in innovation as the current technology of HK Motors cannot meet the planned objectives, Yao Hongguang, an analyst with Huatai United Securities said in a recent report.

Zeng agreed that the joint venture would have to seek a third party from which it can buy or co-develop green vehicle technologies.

JAC's statement did not specify what kind of new-energy vehicle the joint venture plans to make.

According to Yang's plan, the automobiles his company will produce in the US are multi-fuel hybrid models running on natural gas, batteries and gasoline.

HK Motors last year signed a $250 million contract with FEV, a German engine and powertrain system design and development firm, which will develop an engine for HK Motors primarily powered by natural gas.

The technology will be ready next year, and the prototype will debut at a major auto show in 2012, previous reports said, quoting a source from HK Motors.