According to some analysts,
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Frost & Sullivan, a global market research firm, believes the pace of growth for China’s hybrid and electric car market has been exaggerated. “While we believe hybrids have a good future, the sales in China's future market have been overhyped,” wrote Tristin Lin, senior consultant of automation & transportation, Frost & Sullivan China, in an email to HybridCars.com. “Hybrid development in China will not change over one night considering the sales were only 2,100 units in total [last year]. It takes time.”
According to Lin, hybrid sales in China will be below 100,000 units in 2015, and electric car sales will remain below 1 percent of the Chinese market as late as 2020.
I wonder how does Frost & Sullivan come out with these predictions. We need to remember that conventional analysis tools and methods don't work very well for a young developing market, especially one that is heavily influenced by government policies and regulations, as there are just too many variables that cannot be quantified.
The Chinese car market is heavily regulated and taxed. Fuel prices are closely regulated to balance interest of Chinese national oil producers while at the same time not allowing high energy prices to hamper economic growth. It seems that Frost & Sullivan have been applying the conventional tools of analysis that work well in a mature Western economy / developed car market.
The Chinese economy, though it embraces certain capitalist market principles, is still largely a centrally planned one. It is difficult to do any detail predictions on the Chinese car market, and the government is not particularly transparent about its future plans with foreign companies. Giant Toyota Motor Co. found this the hard way when overnight, the Chinese government decided to kill two birds with one stone by launching its economic stimulus package to prop up domestic consumption as well as to remove many polluting clunky old cars that do not meet current exhaust emission standards. The Chinese central government halved sales taxes on sub 1.6-litre vehicles, a segment which the mighty Toyota, famed for its meticulous planning, surprisingly don't even have a single competitive product in that segment. Other Chinese car market powerhouse brands like General Motors (yes GM, which is doing very well in China) and Volkswagen were ideally positioned with the right small car models and zoomed pass the Big-T to register record own breaking sales.
The Chinese government imports 3/5 of its oil, and the Chinese are determined not to be held ransom by Saudi oil sheikhs the same way Americans are. The increasing number of international level events held in Chinese cities is also forcing local city councils to clean up their skies - as shown during the Beijing Olympics. Next year, Shanghai will play host to the 2010 World Expo.
City councils of Beijing and Shanghai are mulling over a new decree to ban polluting old vehicles from entering city centers. From November 2009, all new combustion engine vehicles will be required to meet China IV emission standard. Beijing have already started implementing the first phase of such plan, with cars not carrying the “Environmentally Friendly” label issued by local city authorities will not be allowed into the 6th Main Ring Road - an over 160km long highway network surrounding Beijing city center. Since January 2009, cars that are not meeting an equivalent Euro 4 emission standard were banned from entering Beijing city center.
China also has vast reserve of coal - it is not the most environmentally friendly energy source but there are various means to reduce their impact, and coal certainly meets the objective of Chinese government's intention to reduce their reliance on imported oil. The beauty of electricity is that it can be generated from so many different primary energy sources - solar, wind, geothermal, coal, oil, etc etc. EVs are ideal "mobile energy storage" that could reduce China's dependence on foreign oil - many of which are imported from politically volatile regimes and China does not want to continue to be seen as supporting volatile military regimes if it wants to be taken seriously as a world superpower. The sea routes used by Chinese oil tankers to import crude oil are patrolled by US or NATO Navy forces. Strategically, this does not bode well for China in the long term. It is part of the Asian psyche to be self sufficient, or as the Japanese call it - "defend your (own) castle."
The Chinese car market is heavily regulated and taxed. Fuel prices are closely regulated to balance interest of Chinese national oil producers while at the same time not allowing high energy prices to hamper economic growth. It seems that Frost & Sullivan have been applying the conventional tools of analysis that work well in a mature Western economy / developed car market.
The Chinese economy, though it embraces certain capitalist market principles, is still largely a centrally planned one. It is difficult to do any detail predictions on the Chinese car market, and the government is not particularly transparent about its future plans with foreign companies. Giant Toyota Motor Co. found this the hard way when overnight, the Chinese government decided to kill two birds with one stone by launching its economic stimulus package to prop up domestic consumption as well as to remove many polluting clunky old cars that do not meet current exhaust emission standards. The Chinese central government halved sales taxes on sub 1.6-litre vehicles, a segment which the mighty Toyota, famed for its meticulous planning, surprisingly don't even have a single competitive product in that segment. Other Chinese car market powerhouse brands like General Motors (yes GM, which is doing very well in China) and Volkswagen were ideally positioned with the right small car models and zoomed pass the Big-T to register record own breaking sales.
The Chinese government imports 3/5 of its oil, and the Chinese are determined not to be held ransom by Saudi oil sheikhs the same way Americans are. The increasing number of international level events held in Chinese cities is also forcing local city councils to clean up their skies - as shown during the Beijing Olympics. Next year, Shanghai will play host to the 2010 World Expo.
City councils of Beijing and Shanghai are mulling over a new decree to ban polluting old vehicles from entering city centers. From November 2009, all new combustion engine vehicles will be required to meet China IV emission standard. Beijing have already started implementing the first phase of such plan, with cars not carrying the “Environmentally Friendly” label issued by local city authorities will not be allowed into the 6th Main Ring Road - an over 160km long highway network surrounding Beijing city center. Since January 2009, cars that are not meeting an equivalent Euro 4 emission standard were banned from entering Beijing city center.
China also has vast reserve of coal - it is not the most environmentally friendly energy source but there are various means to reduce their impact, and coal certainly meets the objective of Chinese government's intention to reduce their reliance on imported oil. The beauty of electricity is that it can be generated from so many different primary energy sources - solar, wind, geothermal, coal, oil, etc etc. EVs are ideal "mobile energy storage" that could reduce China's dependence on foreign oil - many of which are imported from politically volatile regimes and China does not want to continue to be seen as supporting volatile military regimes if it wants to be taken seriously as a world superpower. The sea routes used by Chinese oil tankers to import crude oil are patrolled by US or NATO Navy forces. Strategically, this does not bode well for China in the long term. It is part of the Asian psyche to be self sufficient, or as the Japanese call it - "defend your (own) castle."
While these alone do not necessarily increase demand for hybrids or EVs, they are a strong indication of the governments long term intentions. One needs to piece the individual facts and numbers together to form a story.
The famous Project Better Place, via Renault-Nissan Motor Co has already been contracted to come out with a viable plan for EVs in China, starting with the first roll-out in Wuhan by 2011. 13 Chinese cities are said to be part of a mega plan to promote clean vehicles.
Let's not forget that Chinese battery maker and car producer BYD Group is the world's largest producer of lithium-ion cell batteries, with world's richest man Warren Buffett holding a 10% stake in the company. Volkswagen have also recently signed up BYD as its latest hybrid and EV battery partner.
It can be arguable that China's EV and hybrid car market might not be as big as initially predicted. But it is definitely not over-hyped. The key to estimating China's market potential for EV and hybrids does not lie in predicting future consumer demands, but China government's energy and foreign policies. Toyota predicted that China's appetite is for large sedans and SUVs, but the market shifted almost overnight following a policy change with a major preference for sub 1.6-litre small cars.
The famous Project Better Place, via Renault-Nissan Motor Co has already been contracted to come out with a viable plan for EVs in China, starting with the first roll-out in Wuhan by 2011. 13 Chinese cities are said to be part of a mega plan to promote clean vehicles.
Let's not forget that Chinese battery maker and car producer BYD Group is the world's largest producer of lithium-ion cell batteries, with world's richest man Warren Buffett holding a 10% stake in the company. Volkswagen have also recently signed up BYD as its latest hybrid and EV battery partner.
It can be arguable that China's EV and hybrid car market might not be as big as initially predicted. But it is definitely not over-hyped. The key to estimating China's market potential for EV and hybrids does not lie in predicting future consumer demands, but China government's energy and foreign policies. Toyota predicted that China's appetite is for large sedans and SUVs, but the market shifted almost overnight following a policy change with a major preference for sub 1.6-litre small cars.
Related link :
China to be world's largest car market?
The great powertrain debate - diesel vs hybrid
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