Car or supercar?

What would a luxe, high-performance car that's also fuel-efficient look like? Peter Collorafi and Doug Pelmear think they have the answer; they call it the Verde.

Collorafi, president of Decatur, Ind., custom-car maker Revenge Designs, and Pelmear, founder of Napoleon, Ohio, performance-engine company HP2g, will debut the car at Detroit's North American International Auto Show in January 2010. They plan to ship it by next July.

The pair say the Verde (green in Italian, in honor of Collorafi's parents) will be an American-made supercar that gets 100 mpg from an engine that produces a hefty 400 hp with 500 foot-pounds of torque. Those kinds of numbers would put the Verde in the same category as the Lamborghini Gallardo, which reaches a maximum speed of 201 mph, but with one crucial difference: The gas-hungry Gallardo gets a scant 12 miles per gallon on city streets (and just 20 on the highway).

To accomplish these seemingly incompatible goals, Pelmear created a "big block" V-8 engine (similar to a Ford Mustang's) that runs on ethanol. He also developed a proprietary hybrid function that uses ceramic magnets in and around the cylinders to power the car. When the engine needs the full 400 hp, the control system makes the V-8 run as a traditional all-ethanol motor and fires up all eight cylinders. When torque demands fade, the magnets power the car, drastically lowering fuel consumption.

The Verde won't be cheap -- it'll have a starting price of $180,000 -- but that's far more cost-effective than, say, a Lamborghini, which sells for a minimum of $250,000 and is expensive to maintain.

"That Gallardo's clutch will run $16,800 to repair," says Collorafi. "Ours will be done with domestic vendors and labor and run $3,200. That's the niche we want to fill."

Still, skeptics point out that cars with price tags north of $100,000 make up maybe 0.5% of the global market, with total sales of around $10 billion. And this market is already crowded with some of the best-known brands in the business, including Bugatti, Ferrari and Rolls-Royce.

Also, doubters wonder how Revenge Designs and HP2g can achieve high levels of power and fuel economy in a mass-produced car -- a trick that major automakers have never managed to pull off.

Martin Lydell, founder of Lydell Industries, a Jamestown, N.Y., mechanical research firm, notes that Ford (F, Fortune 500), GM and Toyota have spent billions on attempts to increase fuel efficiency in high-performance engines -- to no avail. "These wonder engines never work out once they come out of a factory and get serviced," Lydell says.

But Pelmear and Collorafi aren't worried. They argue that the auto industry has hardly been a model of innovation. And given the right investment, they believe their cutting-edge concepts can be mass-produced. In fact, the two plan a 2012 launch of a four-door sedan that will cost roughly $60,000, broadening their market reach. Plus, they know there's plenty of room for innovation in the luxury car market.

"Luxe car buyers are not just looking for the wow factor," says Tom DuPont, founder of DuPont Publishing, a St. Petersburg-based luxury marketing firm. "They're looking for the breakthrough factor. If these guys can get this car to work as advertised, they have a real shot."