Nissan's chief executive has warned that the development of hybrid vehicles remains economically unviable, with the technology still too costly for mass production.

Carlos Ghosn told the National Automobile Dealers Association that while the development of the technology remained important, it was not a process that underpinned Nyssa's business model.

"They make a nice story, but they're not a good business story yet because the value is lower than their costs," he commented, in an address picked up by Reuters.

Nor did the Nissan chief expect fuel cell vehicles to provide the definitive answer, stressing that such "niche" products were not likely to lead to large profits.

"The cost to build one fuel cell car is about $800,000. Do the math and you figure out that we will have to reduce the cost of that car by more than 95 per cent in order to gain widespread marketplace acceptance," he argued.

Nissan is set to begin development of a gas-electric hybrid model of its Altima sedan ahead of a 2006 production in the US, but Ghosn remains unconvinced, adding that compliance with California's air emissions legislation is the driving force behind innovation.