During the first 80 years of the auto industry, American and European automakers didn't have to worry about pollution or oil supplies. Oil was plentiful and gas was cheap. But by the time China got into the car business, those concerns loomed large. 

China's huge cities already were choking in smog, and the world's oil reserves were expected to dwindle. Even while Chinese automakers were learning the basics of carmaking a few years ago, planners in Beijing set out to develop an electric car industry that wouldn't rely on oil.China's automakers don't seem any closer now than others to solving the technological challenges that have stumped the industry: how to pack more energy in batteries while reducing their size and cost. Chinese auto executives admit they have a long way to go to master the technology.

But American, European and Japanese auto executives and officials are taking China's efforts very seriously. The Chinese government has set ambitious production targets and will provide close to $15 billion between now and 2020.

Half the money will go toward research and development of "new energy vehicles," a term that covers plug-in and electric cars. But money also will be spent on infrastructure, such as the installation of 36,000 charging outlets in Beijing within three years, and pilot projects in 25 cities.

"Where they're ahead is at the political commitment level," said Oliver Hazimeh, a partner at PRTM, a Waltham, Mass.-based consulting firm, which conducted a study with the World Bank on China's electric car plans.

"The Chinese government is very strongly behind electrification, and they also have the raw materials," lithium and rare earths used to make components for electric cars, Hazimeh said.

The implications for the United States and other countries are huge: Because of the size of its market, China is likely to influence standards and technological choices, and its carmakers will want to compete globally with plug-in and electric cars.

Lawmakers slam incentives

BYD Ltd., a leading Chinese automaker, aims to export electric cars to the United States and Europe next year.

Already, U.S. lawmakers claim that some of China's electric car policies, notably its incentives, discriminate against U.S. and other foreign brands.

According to China's New Energy Vehicle Development Plan, the government wants 1 million hybrid vehicles and 500,000 plug-in and all-electric vehicles on China's roads by 2015. By 2020, it wants 5 million plug-in and electric cars in circulation, with some private analysts estimating the figure will be higher.

By then, China aims to have between three and five proficient electric car manufacturers and two or three battery specialists.

"People are taking this seriously," said Michael Dunne, president of Hong Kong investment advisory firm Dunne & Co. "What the government wants to happen usually happens in China, even though the road getting there often looks muddled."

The motivation driving China's strategy is geopolitical, he said. "It's 90 percent about energy security, and less than 10 percent about the environment."

Other countries also have set goals, emission rules and incentives to encourage the use of electric cars. President Barack Obama said in 2008 he wants to see 1 million plug-in and electric cars on American roads by 2015. Chancellor Angela Merkel wants to have 1 million electric cars in Germany by 2020.

A bill before Congress would offer grants and other incentives to help establish 10 electric car "deployment communities."

Meanwhile, the Chinese are ready to offer as much as $15,000 in incentives in some cities — more than what's available to consumers in California. And "they have large-scale pilot projects, much larger than those in other regions," said Hazimeh.

Execs aware of challenges

At the Shanghai auto show last month, Chinese automakers displayed a raft of electric cars — the BYD e6, a Great Wall electric SUV, the Chery Riich M1-EV and the BAIC C30.

U.S., European and Japanese executives touring the show said Chinese production methods had improved, but didn't see any technological breakthroughs. Chinese auto executives are candid, too, about the challenges.

At a conference in Shanghai last month, an executive with Jianghuai Automobile Co., a state-owned firm that has sold 585 electric cars to its employees and those of other state-owned firms on a trial basis, said it's not ready to sell electric cars to retail customers.

"Our technology doesn't allow us to sell to retail customers," Yan Gang, vice president of Jianghuai Automobile, told the CBU 2011 Global Automotive Symposium. "Retail customers are too demanding."

Wu Jianzhong, chairman of Zotye Holding Group, was clearly discomfited when asked at the conference about a Zotye-made electric taxi that caught fire in April in the city of Hangzhou.

Wu apologized and said a center would be established to monitor the electric taxis. But he wouldn't discuss the event, pending an official inquiry.

"The incident caused huge damage to us," Hu Jiangyi, deputy sales director of State Grid Corp., commented later.

Despite the mishaps, China's automakers are ramping up plans to produce electric cars, with most of the output slated for municipal, provincial and federal fleets in the next few years.

State-owned BAIC Group, a Beijing-based manufacturer, is new to the electric car business but expects to produce 150,000 new energy vehicles by 2015, up from 3,500 this year, Deputy Chief Engineer Lin Yi said.

Jianghuai Automobile, based in Hefei, hopes to be making 100,000 new energy vehicles a year by 2015.

But some manufacturers question how the government's funds are being allocated. "Money is going to those who don't need it," said Deng Zhongyi, vice president for sales at BAK Batteries. "Most battery producers are private companies, and most battery producers are pretty weak."

In China's fragmented auto industry, many firms will fall by the wayside in the years ahead, but a few contenders are likely to emerge, analysts say.

BYD, a leading manufacturer of lithium-ion batteries, has won investor backing from U.S. billionaire Warren Buffett and has joined forces with Germany's Daimler AG to develop electric cars for the Chinese market.

"There's a favorable environment here for electric vehicles," Daimler CEO Dieter Zetsche told reporters at the Shanghai auto show.

Given the size of China's market — more than 18 million vehicles were sold last year — the government's push to develop alternative technologies is logical, he said. "They can't develop the way Europe and the United States did, with the current technology."