Hybrid Cars at the Crossroads

China is revising the development outlook of hybrid cars, hoping to open a new situation for this field.

As one of the three new energy technologies in the auto industry, hybrid cars have been placed under discussion for long time in China. People wonder whether these cars can become a major player in the future the auto market. When the Chinese government began to give subsidies to the new energy cars last year, people disappointedly found that hybrid cars were not on the list. However, the experts and government have already begun to revise the development of hybrid cars.

Recently, Dong Yang, secretary-general of the China Association of Automobile Manufacturers, made a public statement that said, “The government will publish a complete set of policies about energy-saving and new energy autos in the coming future. Don’t be misguided by the current policy which focuses on electric cars rather than hybrid cars.” In Dong Yang’s opinion, hybrid cars will get onto the stage sooner or later. “For the automakers, if they ignore hybrid cars, they will regret in the future.”

War of Hybrid Cars

Thoughs the government has not figured out a way for the development of new-energy cars, it published the Notice about Subsidies for Private Consumers of New-Energy Cars, stating that the consumers of pure electric cars and plug-in electric cars can get the maximal subsidies of 60,000 yuan (USD 9,282) and 50,000 yuan (USD 7,735). However, hybrid cars, which can use both fuel and electric power, are not listed in the category of “energy-saving autos” and those who buy hybrid cars cannot receive these subsidies.

The differentiated subsidies mean that the electric cars have been established as the mainstream technology for China’s new-energy auto market, even though hybrid cars are easier to produce on a large scale.

China’s Ministry of Technology has already fixed the 12^th Five-year Plan for the development of electric cars, which focuses on the development of small, pure electric cars and the research of battery motor and electric control system. The Plan requires halving the cost of producing batteries and keeping the inventory of electric cars at 1 million units by 2015.

Though Chinese people generally think that electric cars are the best choices for the private transportation system, all countries in the world cannot develop perfect batteries for electric cars. Presently, the major auto-making countries are engaged in the development and research of pure electric cars, but none of them have achieved industrialization.

Even in Japan, who enjoys better electric care technology, the development of pure electric cars is still in the initial phases between 2010 and 2015. In comparison, the Japanese automakers have already been able to manufacture and sell hybrid cars on a large scale in the market. Toyota, the largest automaker in China, has already launched more than 3 million hybrid cars into the global market.

In the terms of technology, hybrid cars’ thermal efficiency is 10% higher than the ordinary fuel-consumption vehicles and their waste gas emission is 30% less than ordinary cars. Meanwhile, for consumers, there is no difference between driving hybrid cars and ordinary cars. Therefore, ordinary cars (do you mean to say hybrid cars here?) are considered the best solution to the current contradiction between vehicles and energy.

According to the joint survey held by Gasgoo.com and the Financial Daily, most professionals believe that developing hybrid cars is the only way to lead into the electric auto market.

Despite the experts’ highlighting the importance of hybrid cars, China has not seen strong sales of hybrid cars because of the subsidy policies partial to electric cars. Last year, Toyota and Honda only sold several hundred hybrid cars in all of China.

About 19% respondents of the joint survey thought that the “insufficient support from the government” stopped the development of hybrid cars. It was ranked at the second place among all the reasons listed by Gasgoo.com and Financial Daily, while the number one reason was the “high price of these hybrid cars”.

That also means that the technology of hybrid cars has become more mature. The quality and safety are no longer the concerns.

In addition, 15% respondents thought that the “monopolization of technology” was another important reason of the stagnant development of hybrid cars. Presently, the Japanese automakers, especially Toyota and Honda, are the leading enterprises in the manufacturing of hybrid cars. Toyota and Honda began to invest in the research and development of hybrid cars ten years ago and now they have already launched the third generation of hybrid cars. As a result, most of the automakers in other countries cannot compete with them.

The Chinese automakers are short of advanced hybrid technologies and the foreigners are not willing to share their technologies, which also helps explains the stagnant development of hybrid cars in China.

Change of Policy?

According to the latest news, the Development Plan of Energy-saving and New-energy Vehicles for 2011-2020 will be issued in the middle of this year. Then, the Chinese government will issue detailed policies about the new subsidy system for new-energy cars, which will include more kinds of new-energy vehicles and give more subsidies.

Zhao Hang, president of China Auto Technology Institution, thinks it necessary to increase the subsidies for hybrid cars. “The subsidies should not be [universal]; instead, they should vary to how much oil a car can save or how much gas emission a car can reduce.” In his opinion, hybrid cars should be considered a part of new-energy cars instead of the transition product for electric cars.

In the joint survey made by Gasgoo.com and Financial Daily, 57% respondents believed that developing hybrid cars is necessary and helpful for the development of new-energy cars and the country should give support to this field. About 33% of the respondents stuck to the opinion that hybrid cars are transition products for electric cars and thus the government does not need to give too much support. The other 10% respondents could not judge which one was better.

Most of domestic automakers in China have worked out their own development strategies of energy efficient cars, all of which cover hybrid cars, electric cars and vehicles using fuel cells. The manufacturers are betting that the government will cut the partiality towards electric cars and attach the same importance to hybrid cars as well.

In the market, both hybrid cars and electric cars are confronted with the challenge of expensive prices.

About half of the respondents thought the price of hybrid cars should be, at most, 10% higher than ordinary cars. For example, presently, Toyota’s Prius is 50% higher in price than Corolla which is priced at between 123.8 thousand and 199.8 thousand yuan (USD 19.2 thousand and 30.9 thousand).

Toyota has already realized this problem. Takeshi Uchiyamada, vice president of Toyota and “Father of Prius”, says that Toyota is planning to lower the price of Prius to increase the sales of this hybrid car in China. In addition, Uchiyamada highlights the purchasing of components from Chinese local suppliers, which is the premise for cheaper Prius in China.

But it is worthwhile to mention that pushing the development of hybrid cars cannot be done by Toyota and automakers only. The government also plays an important role in this process. In the same survey from above, 74% respondents thought it was necessary for the government to give the consumers of hybrid cars subsidies while only 20% of the respondents claimed the government does not need to give subsidies if a consumer buys hybrid cars.

Whether China’s new subsidy policy will be including hybrid cars remains unknown. But it is certain that reappraising the development of hybrid cars is good for new-energy cars in the world.

Interest of Enterprises

By now, only Toyota, GM, Chang’an Auto and Honda launched hybrid cars in China. And presently the production of Prius, Civic Hybrid and Regal Hybrid in China are stopped. Only Camry Hybrid, CV6 Hybrid and Lexus Hybrid are still available in China.

But even in the limited market, these hybrid cars do not enjoy good sales in China. Camry Hybrid was launched in the market last April and only 2,000 units have been sold as of this May, far from the initial goal of selling 500 units per month. In spite of these poor sales Camry Hybrid is the most popular hybrid car in China. Prius, which came into the market in 2005, only had 3,700 units sold till 2009, when its production was stopped.

Chang’an Auto is the only local automaker of China that sticks to the research and development of hybrid cars. In 2009, it launched CV6 Hybrid in Chongqing but unfortunately only 500 units have been sold to date even with Chang’an Auto giving each buyer 36,000 yuan (USD 556.9) in subsidies.

Ren Yong, vice general manager of New-energy Vehcile Department at Chang’an Auto, says that the high price of hybrid cars and the low subsidies are the main reasons why consumers do not choose hybrid cars.

Fortunately there is some good news. Though the rumor that Chinese government will apply subsidies for hybrid cars has not been confirmed yet, the automakers have already been working on their own development plans for both hybrid cars and electric cars. Toyota also plans to re-introduce the Prius into China, which will be featured with new technology and a new look,

Takanobu Ito, president of Honda, discloses that Honda is going to follow suit and introduce more and better hybrid cars into China. Meanwhile, Honda plans to enhance the development and production of electric cars in Chin as well.