Construction on the first factory to build environment electric buses is under way in Yantai, the coastal city in East China's Shandong Province.

With an investment of 250 million yuan (US$30.9 million) in the first phase of the project, the first bus should roll off the assembly line late next year, said Xie Rongan, chairman of the Yantan-based China-Rising Motors Tech Zone Co Ltd.

Some of the first buses will be put into operation in Beijing and Shanghai where the 2008 Olympic games and the 2010 World Expo will take place.

The city's Fushan District has seen some trial buses travel along a 15-kilometre route since early September. "The six buses on trial have been running smoothly," said district head Jiang Zhonger.

Almost two months of tests have shown no big problems. "We haven't received any complaints from passengers," Jiang said.

Tests showed energy costs for the new buses are only one third of costs for those using gas.

"With no engine and other equipment associated with the gasoline system, maintenance for the buses is easy and saves money," said Xie.

An annual turnout of 12,000 buses is expected to reach an output value of 15 billion yuan (US$1.9 billion) when completed.

The buses are highly valued by 'green' experts and are expected to replace public buses, trolleybuses and tramcars operating in downtown areas in Chinese cities.

"Of the 32 bus assembly lines in China, the line constructed here is the most promising," said Wang Xibang, deputy dean and senior engineer of MMI (Machinery Manufacturing Institute) Planning & Engineering Institute IX. The institute has designed 27 of the lines.

Different to tramcars with rails, the new buses can move around freely just like regular buses, getting charged up within 30 seconds at every stop while passengers get in and out, said Xie.

"With no gas pollution to the air, the buses are worth promoting," said Liu Hongliang, a leading scientist with the Chinese Academy of Environmental Sciences.

Because of increasing shortages of petrol, buses powered by electricity will save a lot of energy, Wang said.

"The new buses are even competitive in the world market where bus transportation is still prevailing," Wang said.