VIENNA -(Dow Jones)- Continental AG (XETRA:CON) (CON.XE) said Friday it expects a substantial increase in hybrid car production as a result of higher fuel prices and the ongoing environmental debate.

In 2012, 2 million new hybrid cars running on a mix of gasoline and electricity will be in circulation, according to Continental's Chief Technology Officer Karl-Thomas Neumann.

By 2014, the number of new hybrid cars could total more than 2.5 million. Neumann said "that is a conservative estimate," in light of rising oil prices and possible tax incentives for environmentally-friendly cars. "It's possible we will see considerably larger growth."

Given that there are a total of 60 million to 80 million cars in circulation, 2.5 million hybrid autos represent a modest share, Neumann said.

In order to broaden the environmentally-friendly movement, "We need a customer who will create a mass market," he said.

So far only Toyota Motor Corp. (NYSE:TM) (TM) and Honda Motor Co. Ltd. have entered the hybrid market. In the past weeks, however, almost every major auto maker has said it wants to produce hybrid or fully electric vehicles.

Hannover-based Continental will next year begin producing a lithium-ion battery for a hybrid vehicle manufactured by Daimler AG's (NYSE:DAI) (DAI.XE) Mercedes- Benz. By 2010 Continental wants to generate "a considerable portion" of its volume from hybrid technology, Neumann said.

Company Web site: www.conti-online.com

-By Katharina Becker and William Launder; Dow Jones Newswires; +49 69 29 725 515; katharina.becker@dowjones.com

    (END) Dow Jones Newswires   06-27-08 0751   Copyright (c) 2008 Dow Jones & Company, Inc.