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China's state-owned Chang'an Automobile group has started making its own hybrid cars, the first such move by a Chinese automaker, the Xinhua news agency reported.

Mass production of the Chinese-designed car, which consumes 20 percent less fuel than ordinary cars of the same size, was launched after six years of research and development, Xinhua said.

"This shows Chinese automakers have grasped the core technology of making hybrid cars," the report said, adding that Chang'an will donate 10 such vehicles for the 2008 Beijing Olympics.

The Chang'an group, a Chinese partner of Ford Motor Co. and Mazda Motor Corp. The listed arm, based in the southwestern city of Chongqing, is also China's largest mini-van maker.

Demand for hybrid cars is negligible in China, where petrol is subsidized and the impact of polluting factories on local neighborhoods is more the focus of environmentalists than larger issues such as global warming, according to Reuters.

Fuel economy figures little in consumers' purchasing decisions in China. Hybrid cars are also expensive since the government offers buyers no incentives to purchase them.

Toyota Motor Corp. was the first carmaker to build hybrid cars in China. General Motors Corp said last month it would begin producing a hybrid car in China from next year, in time for the Beijing Olympics in August.

Japan's Nikkei said the hybrid vehicle made by Chang'an is based on a 2-liter compact wagon that will be able to travel 100 kilometers (62 miles) on 6.8 liters of gasoline, and it will be officially released next year.

The new hybrid is close in size to Toyota's Prius hybrid, which the Japanese automaker has assembled and sold in China since late 2005, the Nikkei said.

Chinese sales of the Toyota hybrid were down 86 percent in the first 10 months of 2007 from the same period a year earlier to 299 units, as the vehicle's 300,000 yuan ($40,700) price tag dampened its popularity, it said.

Changan's new offering will cost around 150,000 yuan, roughly 20,000 yuan more than the base vehicle but just half as much as the Prius, the Nikkei said.