Nissan Motor will invest up to 70 billion yen ($642 million) in an attempt to develop a fuel cell-powered vehicle before the start of the 2007 financial year.

According to AFP, which cites the business daily Nihon Keizai Shimbun, demand for fuel cell cars is likely to increase sharply after 2010.

The project pits Nissan, Japan's second-biggest automaker, against rivals Toyota and Honda, in the race to create an advanced fuel cell vehicle.

Fuel cell cars are powered by electricity generated by combining hydrogen and oxygen over a platinum catalyst.

Nissan started selling cars powered by US-made fuel cells last year.