Shanghai Automobile Industry Corp yesterday announced it will build a new plant for new energy vehicles in Hebei Province as it taps the growing demand for green cars in north China.

The nation's top car maker said it has formed a strategic tie-up with the government of Tangshan in the province to jointly develop new energy vehicles, its listed unit said in a statement to the Shanghai Stock Exchange yesterday.

Located in Caofeidian economic development zone in Bohai Bay, the factory will roll out energy-saving and eco-friendly vehicles, with a preliminary focus on electric buses and hybrid buses.

SAIC said production will later expand to other vehicles and mainly serve demand in Tangshan, the province as well as the northeast region.

Lured by government stimulus measures, including subsidies and trial projects, car makers envisage demand for green cars will surge.

The Chinese partner of General Motors and Volkswagen set up a 2-billion-yuan (US$293 million) company early this year to focus on electric cars and hybrids. SAIC plans to market a series of new energy vehicles from 2010, including mild hybrid, plug-in strong hybrid as well as its self-developed electric car.

Its listed unit SAIC Motor dropped 5.27 percent to 23.70 yuan yesterday, while the benchmark Shanghai Composite Index fell 3.6 percent.