(FORTUNE Magazine) – Maybe you think driving a car that runs on anything other than gas is as preposterous as the idea of an underpowered Ferrari or a nonsmoking supermodel. But if you don't believe we are at a scientific, political, and social crossroads regarding the beloved automobile, imagine going to Congress today to propose mass production of a new personal mobility device: It would weigh roughly 25 times the weight of its occupant; it would use a nonrenewable fuel whose emissions would pollute the air and accelerate the greenhouse effect; and it would be built mostly with nonrecyclable materials. Good luck, right? Which is why the world's major car manufacturers are spending hundreds of millions of dollars annually to reinvent the automobile.

As money like that will tell you, this is no whim, no marketing ploy to sell new vehicles. In addition to compelling environmental reasons, there are strong regulatory pressures forcing automakers to reassess the car's basic constitution. As a result, manufacturers are scrambling to do a great deal all at once, from making cars lighter, cleaner, and more efficient to creating the alternative fuels--natural gas, methanol, hydrogen--that might power them. The long-term goal is the hydrogen-powered fuel-cell, a system that does away with dirty internal combustion in favor of a clean chemical reaction that produces...water.

So how do you get from here to there? "We'll see fuel-cell technology in our lifetime--ten, 20 years from now--but it's uncertain which paths will be the right ones," says Larry Burns, vice president of research and development and planning at General Motors. "So everyone's working on fuel cells, hybrid vehicles, and cleaning up internal combustion engines. There's no silver bullet." Bernard Robertson, DaimlerChrysler's senior vice president of engineering and technology, agrees: "By 2010, one could picture a mix on the road--superclean gas engines coupled with hybrids and fuel cells." Because none of the carmakers can afford to go down all those roads, they are collaborating on R&D. DaimlerChrysler and Ford are investors in Ballard, a fuel-cell manufacturer. Toyota and GM have hooked up to work on hybrid vehicles and fuel-cell technology. BMW, VW, and Mercedes are discussing the merits of various fuel-delivery systems.

If you look carefully, you'll see a significant amount of futuristic technology already out there. At Budget's EV (environmental vehicle) Rental Car desks in the Los Angeles and Sacramento airports, you can rent Honda's natural gas-powered Civic GX (the cleanest-running internal-combustion engine in production). Or you can try one of several electric vehicles--a GM EV1, Ford Ranger EV, Honda EV PLUS, or Toyota RAV4-EV--and get free recharging at 100 stations in Sacramento and at more than 300 in L.A. Natural gas-powered taxis can be found in New York City and Hartford; a few hydrogen-powered fuel-cell buses operate in Vancouver and Chicago. In the next few months Toyota and Honda will introduce hybrid gas-electric vehicles to the U.S. market.

And yet, because Americans still love their SUVs and their low gas prices, manufacturers are having trouble persuading the public to experiment. Says GM's Burns: "It's all about trying to make a car environmentally friendly, but it must appeal to customers and be commercially viable--not just available." After a few costly flops, manufacturers are paying more attention to consumers' desires. "If we want buyers to accept environmental benefits, we also have to offer them utility and performance," says DaimlerChrysler's Tom Kizer, director of powertrain and electrical engineering. It's like slipping oat bran into sugared cereal--as long as we get what we want, we won't mind if some healthy stuff is thrown in. A good example is Dodge's natural gas-powered Charger R/T prototype, whose gutsy V-8 proves that alternative fuels can offer performance comparable with that of gas.

It probably won't be tomorrow that you find an electric or hydrogen-powered vehicle in your driveway, but it won't be too long. So you should know what's happening. It's pretty cool.

FUEL: THE DEBATE

While the spotlight is on the more exotic fuels, the vast majority of cars are still gas-powered, and these days so much is being done to clean up gasoline that it's starting to look like an alternative fuel itself. "The emissions are infinitesimal," says Dave Hermance, Toyota's executive engineer for environmental engineering. Starting with model-year 2000, Ford is making all of its pickups and sport utilities adhere to LEV (low-emission vehicle) standards. (It isn't worth going into specific particle counts here, but suffice it to say that a '99 LEV Ford Explorer, for instance, is 42% cleaner in terms of carbon dioxide, hydrocarbon, and nitrous oxide production than the non-LEV '98 version.) Honda produces ULEV Accords and Civics (ultra-low-emission vehicles are 50% cleaner than LEVs), Toyota a ULEV Camry, and DaimlerChrysler a ULEV Neon. And Nissan, Honda, and Toyota all have gas engines that meet SULEV (super-ultra-low-emission vehicle) standards--one-tenth the emissions of an LEV. SULEV Sentras and Accords are expected to hit the market early next year.

Manufacturers are experimenting with several gas alternatives. "At various times over the past ten years, DaimlerChrysler has sold methanol, ethanol, compressed-natural-gas, and propane vehicles," says Robertson. "Frankly, none has been a big market success. That hasn't discouraged us, but it has made us aware of how important it is that the market comes along with us."

The first step toward making a viable fuel cell is deciding how to power it, since delivering the more exotic (and sometimes toxic) hydrogen-producing fuels to consumers requires a whole new distribution system. Given that there are just 1,312 natural gas stations in the U.S.--only a few of which are open to the public--building access to the even harder-to-handle fuels is further off. "Resolving infrastructure issues is more difficult than building the car," says BMW's project manager of research and development Ralf Frochtenicht.

ELECTRIC VEHICLES: UNPLUGGED?

"I believe the electric vehicle is dead," says Frochtenicht. Others reluctantly agree. GM was the first manufacturer to put an electric vehicle in the public's hands: the nearly silent, Citroen-esque EV1, which California Saturn dealers got in 1996. Since then about 600 have been leased. Even though GM is switching from heavy lead acid batteries to advanced technology nickel metal hydride batteries this year, the range on the EV1 (and other electric vehicles) is at best 140 miles per charge--not within most Americans' comfort zone. "The EV1 was a leadership move on our part--we learned a lot about manufacturing technologies," says GM's Burns. "But we still don't have questions of cost, battery mass, or range answered." Toyota, which has the most electric vehicles of any manufacturer on the road--more than 600--has also been disappointed with the cars' range.

For good reasons, however, most carmakers will continue their work with electric vehicles. By 2003, California will require that up to 10% of cars sold in the state be zero-emission vehicles, and today only electrics meet that standard. More important, all the development work done on these early cars can be directly applied to hybrid and fuel-cell vehicles, which use electric motors. Also, electric cars do make sense in some situations--in urban vehicle-sharing programs, say. Ford's annoyingly named TH!NK, a two-seat electric city car made in Norway, is a good example. Its matte-finish thermoplastic body (think ski boot) is easy to build--only 370 parts--and recyclable. And because no paint or water is used to make the car, its factory produces no emissions (nor does the car, of course). "The bigger the vehicle, the bigger the batteries. So electric is better for niche applications," says John Wallace, director of Ford's TH!NK Group. "Our electric Ranger pickup uses four times the batteries the TH!NK does." Ford plans to test the little car in select North American cities next year.

HYBRID VEHICLES

Imagine a car that has two powertrains: one gas, one electric. The gas engine consumes fuel, while the electric system recaptures energy from braking in the form of heat, as well as power from the generator and regular battery (which is in turn recharged by the gas engine). The stored electric energy can later be used to boost acceleration or to run the car during idling, enabling it to burn less gas. The two systems seamlessly switch back and forth, so drivers don't feel much of anything. There's no need to recharge--that happens automatically every time you stop--and you can get phenomenal range (up to 700 miles) and fuel efficiency (up to 70 miles per gallon).

The challenge with hybrids is that two separate powertrains require more hardware, which can raise their price. But there are ways around that. DaimlerChrysler, for instance, recently showed a concept vehicle called the Citadel--a cross between a sedan and an SUV. The electric system boosts the Citadel's power from that of a V-6 to that of a V-8. With electric power on the front axle and a gas-powered engine on the rear, you have a four-wheel-drive system without all the expensive parts normally needed, which offsets the costs of the second powertrain. Says Tom Kizer of DaimlerChrysler: "If you're going to improve fuel economy, do it on the vehicles that burn the most fuel. A 20% improvement from hybridization on an SUV saves a lot more fuel than a 20% improvement on a Neon. Plus [you get improvement on] greenhouse gases and emissions."

Many executives predict that because hybrids are so easy to use, they will be the first alternative cars for most drivers. Two models, the Toyota Prius and the Honda Insight, will soon be available in the U.S. Toyota was first to mass-produce (in Japan) its four-door, five-passenger gas-electric hybrid, which it plans to bring to the U.S. next June. "The vehicles going to North America get 55 mpg, and they're better in the city than on the highway because of increased braking," says Toyota's Hermance.

Honda, which will launch the Insight in December, is taking a different approach. Unlike Toyota's Prius, the Insight is an options-heavy, sporty two-seater that gets up to 70 mpg. Honda plans to market its high-tech aspects as a benefit, not as penny-pinching features. "The worst thing we could say about this car is that it beats the Geo Metro by 30 mpg," says Robert Bienenfeld, Honda's sales and marketing manager for alternative-fuel vehicles. "That would drive people away. This car is nimble and fun, and doesn't talk down to you."

Toyota loses money on every Prius it sells--a situation that won't improve anytime soon. "We expect to see it become profitable in the future, but I wouldn't say near-term," says Dave Illingworth, Toyota's senior vice president of planning and product development. It's unlikely that Honda will fare much better. For now, manufacturers are forced to eat the cost of these new technologies--and to hope the market catches on quickly.

THE LONG-TERM GOAL: FUEL CELLS

First, let's establish what a fuel cell is: Remember in chemistry class when you split water with electricity to make water and hydrogen? A fuel cell does the reverse: It combines hydrogen with oxygen in a reaction that produces electricity and water. The acknowledged leader in fuel-cell technology is DaimlerChrysler, which has been working with Ballard Power Systems near Vancouver since 1989; it bought a 20% stake in Ballard in 1997 (soon after, Ford bought 15%). In 1994, the then Daimler-Benz showed its first fuel-cell prototype, the Necar. "It was bigger than a minivan, comparable with a Ford Excursion," says Chris Borroni-Bird, DaimlerChrysler's senior manager of technology strategy planning. "Now Necar 4 [a tiny Mercedes A-Class] is perfectly drivable and has room for four passengers."

Fuel cells are enormously expensive. Ballard has powered a few demo public buses with them that sell for roughly $1.2 million, vs. $250,000 for a typical diesel-powered bus. Ford's first drivable fuel-cell prototype, the hydrogen-powered P2000 HFC, has more than $5 million worth of technology stuffed under the skin of a plain white Contour. "Somebody will probably swallow the incremental costs of producing fuel cells, just like Toyota and Honda are doing for hybrids," says Robertson of DaimlerChrysler. "We'd like to do that, but it's conceivable that we'll do it somewhere other than in the U.S." DaimlerChrysler has said it will offer a fuel cell in 2004. With Ford, Honda, GM, and Toyota pushing ahead too, the race is on. In fact, DaimlerChrysler and Ford will begin putting test fuel-cell vehicles on California roads next year.

OUT FROM UNDER THE HOOD

The likely disappearance of the internal combustion engine is leading designers to rethink the aesthetics of the automobile altogether. A good example is the teardrop shape of GM's EV1. Reducing the mass at the front of the vehicle (no more gas engine) cuts friction from wind and enables the car to run more efficiently. "We need to get mass out of vehicles," says GM's Larry Burns. "Once we lighten up car bodies and engines, we need fewer suspension parts, smaller brakes." Aluminum, super-lightweight composite materials, and high-density plastics--all of which are crash-worthy--are making their way from Formula 1 racing into everyday vehicles.

Interior designs are likely to change too. "A fuel cell essentially has no moving parts, so it allows us to create an aesthetic that is driven by the communications/computer age," says Ford's chief designer, J Mays. "It's more architectural, less amorphous, more translucent, less saturated in color, so you head toward silver or white. The more color you take out of something, the more it feels modern to people--like in Kubrick's 2001, where everything is white in the spaceship." Indeed, his notion is visible in a prototype from another company, the Audi AL2, which is awash in translucent accents and vapory colors.

The question, then, is no longer, Will we ever be driving non-gas-powered cars? The question is, When will we start? The answer will depend on where you live. So sit back and wait: Someday you'll be flying by your envious neighbors in a zero-to-60-in-five-seconds fuel cell. And given that this is America, it probably will be a big--and superclean--sport utility.

REPORTER ASSOCIATE Suzanne Koudsi