Consulting Firm: Chinese Hybrid and Electric Cars Are Overhyped

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.

That’s not the impression you would get from the media, which has been sounding an alarm that China will quickly take over world markets for hybrids and electric cars. The New York Times last month reported that the Chinese government wants to boost its annual production of electric and hybrid cars to 500,000 in the next two years, and warned that “Detroit’s Big Three, already struggling to stay alive, will face even stiffer foreign competition [from China] on the next field of automotive technology than they do today.” As we pointed out in our coverage of The New York Times article, safety and cost issues stand in the way of China reaching its goals.

Green Lipstick

In a press release issued last week, Frost & Sullivan addressed the promise and the hype associated with China’s green car plans. The release, “Frost & Sullivan Sees China Heading Toward ‘Green’ Cars,” was picked up by major media including CNBC and CNNMoney. The coverage gave short shrift to Frost & Sullivan’s concerns about hyping China’s hybrid market, and instead emphasized the threat. CNN wrote that China “could dominate the emerging EV market,” and that “hybrid cars will be truly mass-market in China by 2011 or 2012.”

“It’s not a favorable thing if ‘green’ cars just become more rhetoric put out by OEMs’ public relations departments, or little green lipstick OEMs put on it,” warns Frost & Sullivan in the press release. “A lot of issues need to be addressed like battery technology, recharging infrastructure construction, and governmental subsidy, etc., to realize the dream of ‘green’ cars.”

Frost & Sullivan China estimates that total sales of hybrids will be 11,000 units in 2010, growing to 30,000 units in 2012 when public perception of the technology expands and costs decrease. The firm estimates 95,000 hybrid units, or 0.9% of the total market for passenger cars, in 2015.

The forecast for electric cars is more conservative. “For EVs, it’s at infant stage,” writes Lin in her email to HybridCars.com. “We estimate it will start off from 13 pilot cities. By 2011, there will be 600 units. We see 1 percent penetration in total passenger cars sales by 2020.”

Back in the USA

Frost & Sullivan’s track record of forecasting US hybrid sales has been solid. In 2003, the firm forecast US hybrid sales at 2.7 percent of the market in 2010, growing to 8 – 10 percent by 2015. Given actual sales numbers through 2008, as well as product announcements from major carmakers, those forecasts appear to be on track—six years after they were made.

Last year, Frost & Sullivan forecast US plug-in hybrid electric vehicle sales at 130,000 by 2015, which looks conservative but is fairly accurate given everything known about the first introductions of plug-in hybrids in late 2010, and the likely rate of ramp-up—despite President Obama’s goal of putting 1 million hybrids on US roads by 2015.

The firm’s 2006 forecast that nearly all European automakers would hybridize their vehicles to some degree—mostly with micro-hybrid stop-start systems—by 2010 appears to be optimistic. The firm saw that rate of growth in hybrids in Europe as a result of new stringent emission requirements combined with increasing fuel prices, neither of which fully materialized.


  • kerry bradshaw

    Not to sound pessimistic, but pessimism is certainly called for. A million hybrids will have zero effect. They would constitute a totally insignificant portion of the fleet. Obama, as usual, doesn’t know what he’s talking about.

  • henry ibbertson

    Well kerry bradshaw, please define “zero” for us in your weird little world. A weird little world where manners are clearly optional.

  • Think Ahead

    Yes… keep thinking Chinese cars are overhyped. Keep thinking Chinese cars will never catch up. Keep that complacent attitude. That’s how Chinese like it.

    Oops, how did Japanese cars passed the big 3? Well, they started by making cars that people called craps and never looked back. Lesson learned? May be not…

  • hamilton

    The Chinese central government has a funny habit of laying down edicts from above, that makes forecasting a risky business!

    The two state-owned Chinese petroleum companies are busy across the planet trying to lock up long-term oil supplies, but Chinese domestic vehicle demand is simply exploding.

    Having been involved first-hand in China’s auto industry for over a decade, it’s not hard at all for me to imagine an edict that imposes usage fees, limited licenses or whatever on all non-EVs. Even as entrepreneurial types find ways around the rules, EV volumes will skyrocket.

  • hamilton

    BYD has been HUGELY over-hyped in the western press – most of the vehicles delivered to date have been to captive fleets (quicker user feedback, more easily serviced, more limited PR exposure). BYD in fact has been pretty forthcoming about this – probably the third sentence out of their rep’s mouth at this year’s Detroit autoshow, when I spoke with him.

    Nonetheless, BYD has the money, knowledge and gov’t support to keep at EV development until they’ve got a viable product at a decent price. Poor analogy I know – but think back to Zhang Yimou’s amazing opening ceremony at the Beijing Olympics. He captured the spirit of today’s China. The country has a lot of engineers who are working just as long hours as those performer/soldiers, in order to put together a great product that their country can take pride in.

  • VIJAY KHONDE

    Its good. Wish to know more run in km per charge. Is there any device for charging batteries while running, like dynamo/ altinater. If find suitable wish to purchase it in India.
    OR
    I live in India- Mumbai. I have Maruti 800 (Suzuki). Can I convert it to EV
    Regards

  • hybridgreg

    Well, I gathered from this article that the Chinese are speaking about their own car market when it says that they will have only .9% by 2015. Lets not confuse their domestic production with their exports. At last count, Japan only has 95,000 hybrids on the roads. Compare that to the close to 80,000 hybrids in California, alone, and you can get a sense that it does not matter much what they project for the Chinese domestic market. Exports will be considerably more. China will be a player, but they have a rich history of streching the truth in press releases. With China, follow the money and party edicts. If they want to compete in the hybrid market in the US, they can. Telegraphing that goal to their competitors is not their style.

  • Dan L

    Batteries are the missing piece to the electric car puzzle. Any car manufacturer could build electric cars if someone could supply them with cost effective batteries. BYD is the world’s largest battery manufacturer. They are well positioned to dominate the electric car market even if they never learn how to make a decent car. All they have to do is make the best batteries.

  • sean t

    Frost & Sullivan has a good track record, that doesn’t mean they can’t get things wrong.
    Lessons: Japanese and Koreans, and next the Chinese. Be complacent at your own risk.

  • Anonymous

    Obama’s goal is 1 million plug in hybrids on the road by 2015, not just hybrids like the hybrid in name only Malibu. If we compare 130,000 to 1 million, which number will be closer to actuality by the end of 2015? Chevy plans to sell 10,000 in 2011, and 60,000 in 2012, and 100,000 in the following years, so that works out to 370,000. Now Toyota plans to introduce about 150 plug-in Priuses in America in late 2009. But they have not to my knowledge disclosed production and sales projections. But lets say they are similar to the Volt numbers. Then we could expect over 700,000 PHEV on the road.

  • fred smilek

    How much is it going to cost? It seems like it is going to be a great sell. So sad that we have to wait until 2015.

  • fred smilek

    Anonymous this message is for you. Could you please try to post comments and not garbage. It really bothers me becuase some people in here are trying to make a nice conversation and apparently you are not. At least you should try ok.