"We already have a test-car with a fuel cell," Hayek told newspaper NZZ am Sonntag.
"Liquid hydrogen and oxygen are used as fuel, producing very efficient combustion," he said, adding that the management board of Belenos -- the Swatch subsidiary building the vehicle -- has already driven around on the prototype.
"What we don't know is whether it would be cost-efficient to build," said Hayek, the son of Swatch's founder.
The fuel-cell vehicle is not Swatch's first attempt at building a green car. In 1997, it teamed up with Daimler-Benz to build the two-seater Smart but the watch firm later sold its shares to Daimler-Benz.