Mazda will continue development of a hydrogen-powered rotary engine in an effort to compete with bigger rivals investing in fuel cells and other reduced-emission technology, Bloomberg News reported.

Hiroshima-based Mazda's chairman Kazuhide Watanabe told investors on Tuesday at the company's annual shareholders' meeting that it will continue development work on such an engine. Mazda unveiled its first prototype hydrogen-powered rotary engine in 1991, in its HR-X concept car. It announced an improved version in 1993, powering the HRX2 car, the Bloomberg News report said.

Bloomberg News noted that Mazda is the only company that makes rotary engines, making it a brand icon for the company and using it in the RX-8 sports car. The engine has "advantages and weaknesses" and "wasn't appropriate" for all vehicles, company President Lewis Booth reportedly said at the meeting, without elaborating.

The report said Mazda is also collaborating with its largest shareholder Ford in fuel-cell technology, which many industry watchers see as the future of low-emission driving. Mazda's larger rivals, Toyota and Honda, were the first two car makers to market fuel-cell hybrid vehicles, leasing them to institutions in Japan and the US.

According to Bloomberg News, Mazda plans to raise research and development spending 3.6% to 91 billion yen ($US773 million) in the business year started April 1, compared with Toyota's budget in the same period of 690 billion yen.

The news agency report said Booth reiterated that Mazda plans to get 5% of the domestic market in the current business year, up from 4.6% the previous year.