Carmakers presented new-age automobiles at the Paris car show on Thursday that could give much-hyped fuel cells a run for their money in the coming market for vehicles that do less damage to the environment.

By Michael Shields, European Auto Correspondent

PARIS (Reuters) - Carmakers presented new-age automobiles at the Paris car show on Thursday that could give much-hyped fuel cells a run for their money in the coming market for vehicles that do less damage to the environment.

German luxury brand BMW unveiled the world's fastest hydrogen-powered car, dubbed the H2R, which can hit a top speed above 300 kilometers per hour (185 mph) by burning hydrogen in a modified internal combustion engine.

"Our drive toward the future is called hydrogen," but in a way that gives a green twist to existing engine technology, said BMW management board member Burkhard Goeschel.

Renault Executive Vice President Pierre-Alain De Smedt told Reuters that the French brand planned to offer the fuel-saving Stop & Start system made by France's Valeo on its Clio, Modus and Megane range.

The system, designed for urban driving, switches the engine to stand-by when a car stops at a red light or in a traffic jam and kickstarts it when motorists step on the gas.

Renault's rival PSA Peugeot Citroen has already launched the system on its Citroen C2 and C3 models.

Fritz Henderson, the head of General Motors' European arm, said the key was to keep working on all kinds of engines.

"Our bet is that the way to take the automobile out of the environmental equation is the hydrogen economy and hydrogen-based fuel cells," he said, but he added that fuel-cell cars would not become huge sellers quickly. "We are spending a lot of time, money and effort to get there, but you can't focus on only one (technology). You have to keep your feet in various different camps."

Cars that run on hydrogen or hydrogen-based fuel cells emit little but steam themselves, but they do not entirely solve the problem of finding a non-polluting fuel source.

The hydrogen is obtained either from fossil fuels such as natural gas or by applying electrical power to water molecules.

COST HOLD-UP

Juergen Hubbert, head of DaimlerChrysler's luxury Mercedes Car Group, had a stock answer when asked when fuel-cell car would really become popular.

"This question comes up every year and ... I always have to say it will take 10 years," he said, noting Daimler was making good progress with fuel cells but still faced bumps in the road.

"We have reduced volume (of fuel cells). We have reduced weight. What we couldn't reduce so far is costs. Costs are still by far too high," he said.

He cited a chicken-and-egg situation in which volumes had to go up to bring prices down, while high prices were keeping a lid on the size of the potential market. Fuel cells add thousands of dollars to the price of a standard car.

Nevertheless, fuel-cell cars are on the way, he said.

"I think we will have a significant market share, like you see actually with the hybrids, between 2010 and 2012," he added.

He was referring to technology that yokes an electric motor to a standard internal combustion engine so that cars run on battery power at slower speeds. The batteries recharge automatically from the electric motor and by capturing energy from braking.

Toyota's Prius model has emerged at the most popular hybrid, quickly selling out in the key U.S. market.

The world's second-biggest carmaker is also hoping to boost sales of its gasoline-electric hybrid cars in Europe as an alternative to fuel-efficient, diesel-powered cars popular here.

It forecasts a near-doubling in sales of the Prius to 15,000 units in 2005 from a target of 8,200 this year.

The auto maker will also add more hybrid-powered models to its European line-up, starting with the Lexus RX400h luxury sport utility vehicle next spring.

Other hybrid models available in the U.S. are Honda Motor Co. 's Civic and Insight, which in 1999 became the first gas-electric car to be sold in the United States, and Ford Motor Co.'s Escape sport utility vehicle, which began production last month.

Ford expects to sell between 15,000 and 20,000 of the Escape hybrids next year. Honda expects to sell 50,000 hybrids next year, after it adds a hybrid version of its popular Accord mid-sized car.