Oct. 29 (Bloomberg) -- General Motors Corp., the world's largest carmaker, and China's SAIC Motor Corp. signed an agreement to study joint production of gasoline-electric hybrids and other low-pollution vehicles in China.

The companies will also consider expanding a hybrid-bus demonstration project in Shanghai and produce low-pollution models for China by 2008, GM said in a statement today. The first model will be a vehicle using a belt-alternator starter system similar to the hybrid Saturn VUE sport-utility vehicle that GM will sell in the U.S. next year, spokesman Kyle Johnson said. The companies already jointly build GM vehicles in China.

``By working together, we can help take China one step closer to the era of sustainable transportation,'' GM Chief Executive Rick Wagoner said in the statement.

GM, struggling to lift sales and earnings in its main North American market, is growing in China, where it raised sales 28 percent this year through September to 472,468. China is the world's third-largest market for cars and trucks and the fastest-growing. Chinese auto sales rose 15 percent last year, after surging 76 percent in 2003 and 50 percent in 2002.

Financial terms of the agreement weren't disclosed. The Chinese government signed the Kyoto Treaty aimed at curbing emissions of gases linked to global warming, such as carbon dioxide produced from automobiles. The country has announced strict standards on future vehicles sold in the country.

``It makes sense for Chinese companies to tie up with global companies to form an alliance in environmentally-friendly technology, given that the Chinese auto market will continue to grow and the government is getting concerned about pollution issues,'' said Koji Endo, an analyst at Credit Suisse First Boston in Tokyo.

Fuel Cells, Too

GM's partnership with SAIC Motor will also include hydrogen fuel cells, a power system that Detroit-based GM has said could eventually replace gasoline engines.

``To make this happen, we need to bring down costs and build the necessary infrastructure -- and the best way to do that is by business and government working together,'' GM's Wagoner said in the statement.

Hybrids combine a gasoline engine with electric motors that run on batteries recharged during braking. Fuel cells create electricity in a chemical reaction that combines hydrogen and oxygen, ideally with only water vapor as a byproduct.

The agreement follows a similar tie-up between SAIC Motor and Volkswagen AG, announced in September.

SAIC Motor, which had a 17 percent share of the Chinese market in 2004, makes GM's Excelle, Regal, Sail, Chevrolet Epica and Aveo models.

Toyota Motor Corp., the biggest seller of gasoline-electric hybrid vehicles, is planning to assemble Prius models in China by the end of this year with partner FAW Group.

To contact the reporter on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

Last Updated: October 29, 2005 05:00 EDT