While improved engine efficiency remains a key trend, companies like Volkswagen are also teaming up with the energy industry to examine ways to replace conventional petrol and diesel in part as a way to cut carbon emissions.
"Biofuels will play a bigger role. In Sweden we have seen tremendous growth in terms of biopower and ethanol and Saab has taken a leadership role in Sweden," Jonathan Browning, General Motors European head of marketing, said in Geneva.
Brands like Saab but also Ford have been at the forefront of offering so-called flex-fuel vehicles such as the Saab 9-5 BioPower or the Ford Focus FFV that run on ethanol, petrol or any mixture of both.
"We are going to pursue that hard, especially in the US," Ford President and Chief Operating Officer Jim Padilla said.
Most biofuels can be made from either fermenting into alcohol sugar that is found in grains, cereals and other crops, or by pressing the fruit or seeds of plants like rapeseed to create combustible vegetable-based oils.
Countries like Brazil have invested for decades in fuels like ethanol produced from sugar cane, but the role of renewable energy sources has gained importance after President George Bush highlighted their use as part of a plan to cut US dependence on Middle Eastern oil by 75% in the next 20 years.
The EU, the world's biggest producer of biodiesel, has set a target of blending 5.75% of conventional fuels with biologically based ones by 2010 to help meet Kyoto protocols.
The German auto industry has already committed to creating the technology to increase this to 10% before that date.
Industry executives add that the latest technology, biomass-to-liquid (BtL), offers an even greater opportunity to lower carbon emissions since it breaks down the chemical compounds of the entire plant to yield a synthetic product that is among the cleanest-burning fuels available.
Volkswagen and Shell have teamed up with Choren Industries to develop SunFuel.
Not without problems
Citing a joint study by the European Union and the oil industry, the German automotive industry VDA estimated carbon dioxide emissions could be slashed by 90% with BtL fuels.
"We see high potential in GtL (natural gas to liquid) and BtL -- the great thing about them is that they are clean burning and you can use the existing infrastructure," Bernd Bohr, head of Robert Bosch GmbH'sindustry leading automotive parts business, told Reuters in Geneva.
As opposed to other alternatives like compressed or fluid natural gas and hydrogen, storage both in the tank and at filling stations differs little from conventional fuels.
"We share the excitement around the potential of second generation bio-fuels which promise to achieve 'well-to-wheel' CO2 emissions not far short of those of the hydrogen fuel cell," Ford of Europe head Lewis Booth said recently, adding that carbon reduction is the focus of much the firm's R&D activity.
Even the chief executive of German truckmaker MAN AG said this month that he has never been so enthusiastic about an environmental technology as he is about synthetic fuels.
Investors have also been swept up by the interest. Shares in German biofuel firm EOP Biodiesel rose 31% since their debut in September and Biopetrol Industries gained a whopping 63% following its listing in November.
BMW's Burkhard Goeschel argued there's little hope of significant impact on global emissions if the focus lies more on satisfying what is likely to be limited demand for cars that run mainly on alternative fuels such as FFVs.
"You can achieve a far greater degree of efficiency if you just blend them into existing fuels," the German carmaker's head of research and development told Reuters.
Alternative fuels are not without problems. Their generally lower energy density requires greater consumption to travel the same distance. Moreover some, like biodiesel, change their consistency over time and their viscosity can clog engine parts.
GM's Browning also said disparate views among countries over which technologies to push hindered the advance of biofuels.
"One of the difficulties in seeing a quicker move across the industry is the lack of unity by governments in terms of which alternative fuels are encouraged, which are sponsored in terms of the infrastructure put in place. You have very different situations in terms of national markets," he said.
Germany's VDA warned that biofuels must be more than just a passing fad if they are to make an impact, since the auto and energy industries must still make substantial investments in order to guarantee supply.
"For biofuels to take hold it is going to take market incentives," Ford's Padilla added.
Additional reporting by Mike Smith and Michael Shields