Honda's new FCX clarity feels like a perfectly ordinary car—which may well be the most shocking thing about it. It looks and drives like a run-of-the-

Honda's new FCX clarity feels like a perfectly ordinary car—which may well be the most shocking thing about it. It looks and drives like a run-of-the-mill four-seat sedan. Slip behind the wheel and press the pedal with your foot, and the car accelerates with satisfying punch. But after a few minutes of cruising, you'll notice that something is missing. The only audible engine noise is a faint whir, so faint that you can actually hear the tires swishing along the asphalt.

That's because the Clarity is a hydrogen-fuel-cell car, one of the most advanced in the world. The once bulky fuel-cell stack that supplies energy to the engine has been reduced in size by half over the past decade while increasing the power output by 50 percent. It's the first to be certified by the U.S. Environmental Protection Agency, and the first to be delivered to retail customers (albeit on a leasing basis). As for CO2 emissions, the only exhaust it produces is a trickle of water. And perhaps most important of all is what stands behind it: A state-of-the-art factory that's ready to produce thousands of the vehicles once the market's ready. Most of Honda's competitors, by contrast, are still bringing concept cars to the auto shows.

The Clarity is also just one of a number of next-generation green automobiles that are beginning to come off assembly lines in Japan. These vehicles, whether powered by fuel cells, long-lasting batteries or renewable biofuels, have been around for years, but almost always as one-off utopian designs or experimental models that were designed mainly to attract good green press. Now Japanese automakers are going to the next level, entering the green-car mass market, in many cases years before their competitors. Nissan plans to introduce an electric vehicle to the United States and Japan by 2010, with a global rollout in 2012. Toyota is road-testing a plug-in hybrid in Japan, the United States and Europe and plans to launch it in 2009 (there's a buzz, unconfirmed by the company, that this hybrid car could use solar power as well). Honda, a distant second to Toyota in the hybrid market, is preparing for the launch of a new car highly anticipated for its innovative green technologies, including its state-of-the-art battery. Mazda will offer the world's first hydrogen-gasoline hybrid in Japan by next March. All of these companies are benefiting from close cooperation with electronics manufacturers, component makers and suppliers that are helping to push Japan to the forefront of green-car technologies. "Globally, Japanese companies are definitely at the top right now, and I expect them to remain No. 1 in the future," says Mike Omotoso, an auto analyst for California-based J.D. Power and Associates. "It's definitely having a positive impact on the Japanese economy."

In large part, Japan's lead in green-car technology is an outgrowth of its old austerity. Japan was obsessed with energy efficiency long before global warming made it a worldwide obsession. For decades Japanese companies have struggled to cope with their oil-poor country's sky-high energy costs by placing a premium on energy-saving technologies, and it has paid off. Even old Japanese industries are cutting-edge in cutting energy costs. Japan continued to make batteries long after U.S. rivals quit, and now makes the most efficient batteries in the world. Japanese steelmakers have ceded ground to cheaper emerging-market rivals but are still unsurpassed in the fine niche art of making superlight steel for car bodies. The hidden strength of Japanese smokestack industries helped create its green cars, and now the success of those cars is pushing more and more Japanese industries—electronic-motor and control-unit producers, all sorts of material companies—to innovate faster.

It's impossible to tally the direct economic effect of the green-car race at this point, but it's huge and likely to grow. The Prius is already the most popular green car in the world, and Toyota plans to raise domestic output of the Prius by 60 percent to 450,000 a year by 2009. By 2015, Goldman Sachs expects the hybrid-vehicle market (including plug-in hybrids) to grow to 2.5 million, up from half a million in 2007, with Toyota and Honda in the lead. Analysts say plug-in hybrids, which run on a battery alone for a short range, are the vehicles that will gradually ease drivers out of the gasoline age and into the electric era. Goldman analyst Kota Yuzawa says hybrid vehicles could account for 5 to 10 percent of operating profits for Honda and Toyota in 2010. And the potential markets look likely to grow as oil prices hit new highs and environmental regulations get tighter.

The focus on green cars reveals the kind of industrial vision that Japan is often criticized for having lost decades ago. Toyota launched the G21 Project, which ultimately produced the Prius, back in the 1990s, when oil prices were low and America's love of SUVs was still growing. The idea was to create a model car for the 21st century, and counter Toyota's reputation for "boring" vehicles. Toyota simply saw the long view before others, assuming that the petroleum-based economy was becoming unviable for a variety of environmental and economic reasons, according to Noriyuki Matsushima, analyst at Nikko Citigroup in Tokyo.

by : Christian Caryl and kiko Kashiwagi