The factory will be the first in the world building EcoMotor’s “opoc,” opposed piston, opposed cylinder engine, at a commercial scale. When it starts production in 2014, the factory will aim to produce 150,000 engines per year. There’s also an adjacent site that could expand production to 400,000 engines per year down the road.

Strategic deals with huge Chinese companies are becoming a valuable way for Valley cleantech startups to move into commercial production and actually have a chance at succeeding. In particular Khosla Ventures has been adept as of late at helping its companies navigate deals in China.

Chinese parts company Wanxiang invested $420 million into GreatPoint Energy – a company based in Cambridge, Mass. that converts coal into cleaner-burning natural gas — in order to commercialize GreatPoint’s technology in China. LanzaTech, which turns gases emitted from industrial processes into biofuels and biochemicals, is working with China’s largest steel producer, Baosteel, as well as Chinese coal producer Yankuang Group. Khosla Ventures has invested in both of these firms.

By partnering with a giant like Zhongding, EcoMotors doesn’t have to raise and spend a lot of money on infrastructure. In return, Zhongding will sell the engines domestically in China — these particular engines will be powerful ones used for generators, off-road vehicles and commercial vehicles. Chung called the strategy “cleantech done right.”

EcoMotors’ engine can be 20 to 50 percent more efficient, 20 to 25 percent lower in cost to buy, and half the size and half the weight of a traditional engine. For car manufacturers the capital savings are even greater — at 30 to 40 percent — when using EcoMotors engine to build an efficient vehicle. When placed in a passenger light weight vehicle, the engine could deliver a 100 MPG, 5-passener, car.

The Chinese car market, as well as the engine market, are the largest and fastest growing in the world. And the Chinese government has set very aggressive goals to reduce the country’s air pollution and carbon emissions.

EcoMotors is a particularly unusual investment for a venture capital firm because the internal combustion hasn’t seen much innovation in decades. But the global trends of needing this innovation are clear: more and more countries are pushing for lowered car emissions, air pollution is a massive problem throughout developing countries, and the cars that will catch on in the price conscious developing markets will be cars that use fuel efficiently and thus save their customers money. Other startups working on efficient engines include Pinnacle Engines, Achates Power, Grail Engine Technologies, and Transonic Combustion.

Updated at 3:00PM PST, April 9, with mention of the deal with Baosteel, China’s largest steel producer.

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Transonic Combustion is creating an efficient fuel injection system for an internal combustion engine that minimizes heat waste. The system involves heating fuel to a “supercritical” state before injecting it into the combustion chamber, allowing it to combust without the need for a spark. The company uses software to precisely adjust the injection based on the engine load.

The system can run an engine that uses both gas and diesel as well as biofuels, and it is supposed to create an engine that is 50 percent more efficient than standard engines. About two years ago Transonic Combustion showed off a demo vehicle with its engine tech that got 64 miles per gallon in highway driving.

The engine is supposed to eventually cost about the same as high-end fuel injection systems currently on the market, and Transonic Combustion has previously stated that it wants to start deploying its engine by 2014.

More efficient traditional engines could be a lower-cost way to reduce carbon emissions from cars before electric vehicles develop into any kind of market. Auto companies will also be looking for more efficient traditional technologies, because fuel standards in the U.S. are set to rise from 27 miles per gallon today to 54.5 miles per gallon by 2025, thanks to the Obama administration’s plan.

Transonic Combustion is just one of a variety of startups that have emerged in recent years to try to remake the internal combustion engine to optimize efficiency. Other startups include EcoMotors, Pinnacle Engines, and Liquid Piston.

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The engine, called the X2, will be available as a beta prototype for outside testing by the first quarter of 2013. The engine is able to achieve more than 50 percent efficiency under typical operating modes, while typical diesel engines usually achieve less than 20 percent efficiency.

The X2 is a new type of engine architecture, based on a rotary engine. LiquidPiston CEO and President Alexander Shklonik told met in an interview that this new version of the rotary engine is more flexible and can thus be more efficient when optimized in the right way. The engine is smaller, lighter, and cheaper, with ten times fewer parts, than current diesel engines on the market, says Shklonik.

Shklonik told me in a phone interview that the first applications for the engine won’t be the mainstream automotive industry, but will be industries like defense, long haul trucks, plug-in vehicle range extenders, and other more niche markets. LiquidPiston has raised $12.3 million so far, and tells me that it’s looking to raise another $20 million later this year. The company has around 12 employees.

Other startups that have developed more fuel efficient engines include EcoMotors, Pinnacle Engines, and IRIS Engines. More efficient engines will be used in both the next-generation of cars sold in developing countries, and also countries like the U.S. that have new fuel efficiency standards. The Obama administration passed the CAFE standards, which require a fuel efficiency of 54.5 miles per gallon by 2025.

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EcoMotors said this morning that the funding will help it create diesel engines with customers, including Navistar and Zhongding Holding Group. The company will also use the funds to make a gas-version, in addition to its diesel-version. Eventually EcoMotors will also develop a compressed natural gas version, too.

In the emerging world of electric cars, and biofuels, EcoMotors is an example of a startup that is looking to remake the traditional transportation world of the internal combustion engine. Other companies building new technology for the internal combustion engine include Grail Engine Technologies, and its efficient two-stroke engine, Pinnacle Engines, which makes a four-stroke engine (video here), Achates Power, which is building a closed piston, 2-stroke engine, and Transonic Combustion, which is creating what’s called a “supercritical fuel injection system” for internal combustion engines that minimizes heat waste.

More efficient traditional engines could be a more low cost way to reduce carbon emissions from cars, before electric vehicles develop into any kind of market. Auto companies will also be looking for more efficient traditional technologies, because fuel standards in the U.S. are set to rise from 27 miles per gallon today to 54.5 miles per gallon by 2025, thanks to the Obama administration’s plan.

EcoMotors has also been targeting applications for the developing world, where car owners with less disposable income would be more concerned about using less diesel and gas and having a more efficient engine.

Moving from the prototype and development stage into mass commercialization and partnering with big auto makers will be the difficult hurdle for these startups. Auto makers move notoriously slowly (as slow as utilities and telcos) and won’t easily bet on risky startups.

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That’s not good news for electric car makers, but could actually be a driver for companies building new, more efficient, internal combustion engine technology. Last week I interviewed a startup called Grail Engine Technologies, which was a recent finalist in the North-Central Cleantech Open. Grail Engine Technologies has been developing an efficient two-stroke engine that the company says uses less fuel but is more powerful than larger engines and could be sold commercially in about two to five years (see video below).

Other companies that I’ve covered that are developing more efficient engines include Pinnacle Engines, which makes a four-stroke engine that it says can deliver 30 to 50 percent better fuel economy, and could be commercialized by 2013. Another is Achates Power, which is building a closed piston, 2-stroke engine that gets 10 to 15 percent better fuel economy than state of the art diesel engines that exist today. Then there’s EcoMotors that is building a diesel engine with stackable modules where one of the engine modules can be shut off when it isn’t needed. Transonic Combustion is yet another, which is creating what’s called a “supercritical fuel injection system” for internal combustion engines that minimizes heat waste. (Here’s 7 startups building green car tech for a pre-electric world).

Venture capitalists are funding these types of companies. Pinnacle has raised $13.5 million from NEA, Bessemer Venture Partners and Infield Capital. Achates Power counts Sequoia Capital, Rockport Capital Partners and Triangle Peak Partners as backers, EcoMotor’s has received funding from Bill Gates and Khosla Ventures, and Transonic Combustion also counts Khosla Ventures as an investor.

Moving from the prototype and development stage into mass commercialization and partnering with big auto makers will be the difficult hurdle for these startups. Auto makers move notoriously slowly (as slow as utilities and telcos) and won’t easily bet on risky startups. Licensing technology to manufacturers, which Grail Engine Technologies plans to do, will be one of the more capital efficient ways to reach the market.

More efficient internal combustion tech could be boosted by policy that raises the average miles per gallon requirements in the U.S. The Obama administration has proposed raising the average MPG to 56.2 miles per gallon, which is nearly double the current MPG level. And combine more efficient engine tech with more sustainable biofuels, and you’ve got a non-plug-in, but economical, green car option.

Images courtesy of Grail Engine Technologies, EcoMotors, Pinnacle Engines.

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The process involves the controlled injection of gas, like carbon or nitrogen, into the injection molding process, which creates millions of non-uniform bubbles into plastic parts, reducing the weight dramatically, but maintaining the performance and durability. Ford says the weight of plastic components can drop by 10 percent using MuCell, and Ford wants to reduce the weight of its vehicles by between 250 and 750 pounds per car by 2020.

The technology is an example of the types of eco innovations that automakers can turn to in the short term, while making more aggressive longer-term efficiency moves like with electric cars and biofuels. Ford has been working on its mobile applications in a similar way, and at our Green:Net event on April 21 in San Francisco, you’ll be able to hear on Ford’s connected car play from Edward Pleet, product and business development manager for connected services for Ford.

More efficient engine technology for internal combustion engines has also been receiving investment and interest from big auto makers. Here are 7 startups building green car tech for a pre-electric car world, including Achates Power, EcoMotors, and Transonic Combustion.

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Klein also showed off the new finishing of the box, which has been improved to be more resistant to fingerprints, as well as other design features. Watch the entire video below:

The first Box arrived from the Boxee Factory from Zach Klein on Vimeo.

Boxee CEO Avner Ronen didn’t want to point fingers when the company was forced to delay its date of sale last month, but the delay of NVIDIA’s Tegra 2 chipset likely played a big role.

Update: A Boxee spokesperson informed us via email that Klein misspoke and that “the Boxee Box will come out in November.  If that changes we will make an official announcement on the blog and with D-Link.”

Related content on GigaOM Pro: With TV Apps, Over-the-Top Video Gets New Backers (subscription required)

Khosla Ventures has previously invested in Troy, Mich.-based EcoMotors, and earlier this year Gates invested $20 million in the VC firm’s green technology fund, partly to get exposure to the “great entrepreneurs” that Khosla is backing, Gates told CNET in January. But an EcoMotors spokesperson told us this morning that Gates’ participation in EcoMotors Series B round did not come through the Khosla fund.

The spokesperson described this latest EcoMotors deal (which comes on the heels of Khosla Ventures, Gates and others investing $35 million in the traveling wave nuclear power startup TerraPower) as a three-way private transaction between Khosla Ventures, Bill Gates and EcoMotors.

EcoMotors is one of a slew of startups competing to deliver technology for more efficient, lower emission versions of the old internal combustion engine vehicle (see 7 Startups Building Green Car Tech for a Pre-Electric World). The company’s engine design includes stackable modules, one of which can be shut off when it isn’t needed. Focusing on developing markets, the company has been working to deliver a diesel engine by 2011 that can deliver 100 MPG for highway driving in a 5-passenger car.

This past spring EcoMotors struck a deal with automotive supplier Zhongding Holding (Group) Co. and engineering services firm Global Optima, with China-based Zhongding and its Michigan-based commercial partner Global Optima agreeing to invest up to $18 million to develop EcoMotors engines and work toward commercialization.

Eventually, the startup hopes to see its engines deployed in cars, light trucks, marine and agricultural applications, and in stationary generators — “essentially anywhere conventional gas or diesel power is utilized.”

EcoMotors and other venture-backed companies in this sector may have a tough climb to get their technology into the lineups of major automakers, however. John Viera, Director of Sustainable Business Strategies for Ford Motor told us recently, a technology that promises to deliver fuel savings of at least 1 MPG is “large enough to get our attention,” (EcoMotors says its so-called “opoc” engine can improve fuel efficiency by 50 percent), but the automaker rarely bets on an unproven supplier.

With software and apps built on the automaker’s Sync platform (developed by Microsoft) however, it’s a different ball game. According to Viera, “Software — that’s where you’ll see outsiders come in.”

Image courtesy of EcoMotors

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Live blog excerpts of their comments:

Blair: I’m absolutely thrilled and delighted to team up wth Vinod. When you’re not in office, you meet some unusal and creative people. I’ve been working for two years since leaving office in the private policy. I did breaking the climate deadlock. Policy makers, particularly after Copenhagen, need to know what’s going on in the technology area. I’m neither a tech expert nor a financial expert, but I find the conversation I had to contemplate the vast expanses of my own ingnorance. The answers to climate change and energy security lies int he technological innovations. I am thrilled to play whatever small part I can.

Note: Bill Gates just walked in the room (he’s a Khosla Venures LP)

Samir Kaul: Can we get your thoughts on governemnt subsidies and cleantech.

Vinod Khosla: You can not invest in technologies that are based on subsidies. Any of our techs can get to scale with 5 to 7 years. Subsidies help companies start and get scale, but can’t rely on subsidies.

Blair: When you look at the facts of what will happen over 10 or 15 years, 70 percent of power plants will be coal fired in China, India. One of reasons to look at CCS, if we can’t resolve this question, we can’t resolve the global issue.

Vinod Khosla: I chose to work on energy because it is a solution to poverty. If we can put all the money from oil into biofuels, we can do more for Africa than we can for any other publc policy. Most industrial tech increases urban and industrial GDP. Biofuels can increase rural GDP.

Blair: The challenge in energy is enormous. In the schools they have no electricity. One thing that is exciting about these technologies is they are disruptive. They change the rules of engagement.

Khosla: What has surprised me is the diversity of the technology. That’s why we need people like Tony. The effects of policy on innovation and innovation on policy is invaluable.

Soraa: Shows off its LED lighting technology. 75 percent less energy for lighting. This takes a bite out of coal.

New PAX: Trying to reinvent air conditioning. 75 percent less energy for cooling. Tom CEO: The system has its root in rocket propulsion. Water as a refrigerant, and it’s 5 to 6 times more efficient than what’s out there. Tom ran a large air conditioning division at WhirlPool.

Cogenra: Multiplying solar energy efficiency at utility scale. Distributed solar generation, produces electricity and hot water.

Calera: While everyone else thinks carbon dioxide is a problem he thinks it’s a valuable feedstock. Eliminating the problem of cement and CO2 at the same time. This is something we can do profitably for the Chindia test. Tony Blair rolled up his sleeve and stuck is hand in the large vat of cement (there’s a plant in Monterey Bay). Goal is most plants will have this in a decade.

EcoMotors: Don Runkle did the EV-1 at GM (developed it, didn’t kill it), and partnered with Peter Hoffbrau. We’ve already achieved the Chindia price point. The engine has less than half the parts of a normal 4-stroke engine. Comes in gas, diesel and natural gas. Bringing out of lab and into commercialization.

Kior: “Recrude” drop in replacement for crude. Oil used to be biomass and converted to crude oil. Could we catalytically accelerate that reaction out of today’s carbon rather than yesterday’s carbon? Yes. In a ew seconds we convert that biomass to a renewable crude oil. Fred considers himself competing against Hugo Chavez.

Tony Blair Interviews Khosla Companies:

Blair: Kior, your process works. Can you do this catalytic process that is cost effective of hte whole range of biomass materials? Can it be scaled up in a way to be commercially competitive?

Fred Cannon, CEO Kior: We’re now making 15 barrels a day at a plant in Houston. We scaled over last year from a few liters a day to a few barrels a day. Even on the more expensive feedstocks we’re competitive on oil prices at this scale.

Blair: To Calera, what’s the hitch to manufacturing cement with CO2? Is it that it only works with certain materials, why wouldn’t people be wanting to do this anywhere?

Brett Constantz, CEO Calera: No one was considering cement to be a problem before. Aside from the technical questions, CCS hasn’t been profitable it will always require subsidies.

EcoMotors CEO Don Runkle: We have one fundamental advatage. Liquid fuels have 100 times energy and power density of batteries. There is no contest. We started with electric cars and the internal combustion engine is what ruled in terms of efficiency and cost, etc. I think we have the cell phones of engines in China. China skipped over land lines and went to cell phones. They could duplicate that for motors. It has a lower carbon footprint than electric cars. Our first paying customer is in China, Zhongding Holding (Group) Co. (see story here). We’ll have another announcement in June, and hopefully commercialize this technology in 2 years.

New PAX: This is the Nano of air conditioning. We can put it everywhere. Not just comfort but also safety — refrigerate foods, medicine. We’re inventing the science as we go. We have one that works, it works pretty darn good, but we haven’t even tapped how good it can be. It’s a rocket engine that by the way cools.

Cogenra CEO: Solar combined heat and power. Customer doesn’t need to buy elecricity or gas. The greenhouse gas impact is three times as much. Today we’re focusing on medium to small scale, multi-residential, apartments, jails, where people need heat. Cogenra CEO formerly at Applied Materials, semiconductor company.

Image courtesy of World Economic Forum’s photostream.