General Motors Holden is planning a major investment in ethanol production in Australia.

Holden’s Managing Director, Mark Reuss, says the company is in talks with the American firm, Coskata, to establish Australia’s first plant to produce cellulosic ethanol, made from non-edible plant material, for use in motor fuels.

The development of the plant will coincide with Holden’s production of the first locally-build cars to run on E85 (fuel made up of 85 per cent ethanol). E10 fuel is already widely available and can be used in many modern cars.

According to Mark Reuss, "Australia could lead the world in researching and developing vehicles powered by a range of alternative fuels. It (ethanol) is not the only answer but things like LPG, ethanol, maybe CNG (compressed natural gas) here, with the resources that Australia has, I think this country could really lead that."

The company also plans to import the Chevrolet Volt plug-in hybrid electric car to Australia by 2012.