The fastest growing car market in the world is displaying its green credentials at the Auto China 2010 show, with new hybrids and electric vehicles taking centre stage amid dozens of car launches.
Car buyers not ready for power trips
BEIJING // The fastest growing car market in the world is displaying its green credentials at the Auto China 2010 show, with new hybrids and electric vehicles taking centre stage amid dozens of car launches. But despite the millions spent developing alternative energy vehicles, analysts and even makers admit that interest from China's car-buying public, most of whom are purchasing a vehicle for the first time, is limited.
The show also features the standard industry fare of female models posing next to cars and even going through dance routines to attract the attention of photographers. Almost 1,000 cars are on display at the biennial show, with 89 of them making their worldwide debut. Manufacturers, both local and international, have become increasingly keen to show off their latest wares in China. Last year the country overtook the US to become the world's largest car market, with sales growing 46 per cent to 13.6 million, partly thanks to government subsidies and tax breaks.
Xu Changming, an official at China's state information centre, predicted last week that this year's sales would hit 16 million, with the country's industry having already shifted 4.6 million vehicles in the first three months of this year. Among those were 3.5 million sold, a 76 per cent rise on the same period last year But to allay any environmental fears linked to such rapid expansion, the organisers of Auto China gave this year's event the tagline "For a Greener Tomorrow", and makers responded by displaying nearly 100 eco-friendlier cars.
General Motors (GM) unveiled a mini-van version of its Chevrolet Volt electric model, and announced it would begin selling the saloon version in China. Hyundai, while giving its 2011 Accent or Verna model its world premiere, complete with a team of dancers, also displayed its Blue-Will plug-in hybrid, which the Korean car maker said could be launched in late 2012. Other companies showing off their eco-credentials included Brilliance Auto, which has technical collaborations with BMW. Brilliance's display area included a pint-size electric car aimed at commuters.
Volkswagen announced it would begin production of electric vehicles in China within four years, while also showing an electric variant of its Lavida model. But makers were under no illusions that shifting such eco-cars from the showrooms would prove easy in a country where more than four-fifths of new cars are bought by first-time buyers, who are more concerned with having their own vehicle for the first time than the environment.
Lin Zhang, the general manager for international sales and marketing of Geely, the Chinese car maker that recently bought Volvo, admits hybrid or electric passenger vehicles have yet to make an impact in China. "The understanding [among the public] is that these vehicles will be significantly more expensive," Mr Lin says. Michael Li, a motoring industry research manager for the Shanghai-based Ringier Trade Media, says another hurdle is that infrastructure for electric vehicles is not yet in place.
"It's not really getting to the [consumer] market yet," Mr Li says. "There are some of these hybrid and electric vehicles, but [they are] not being sold to the public." In any case, the environmental benefits of having more Chinese motorists drive electric vehicles were questioned before the show started, as more than four-fifths of the country's electricity is generated by coal-fired power stations.
Huang Xiangdong, the vice president of the car maker Guangzhou Automobile Group, says "battery electric vehicles and plug-in hybrids do not save more energy than conventional cars on a wheel-to-wheel analysis". But China should continue to go down the road of building more green vehicles, says John Zeng, an analyst from IHS Global Insight visiting the show from Shanghai. Mr Zeng says that with conventional engines the gap in technology between Chinese manufacturers and the top Japanese and western car makers was sometimes quite big, citing turbo-diesel engines as an example. With alternative vehicle technology, however, the gap was much narrower, he says.
"That's why we're seeing so many electric vehicles," Mr Zeng says. There will be "a long silent period" in which interest in electric vehicles in China remains low, but Mr Zeng predicts the attitude of consumers will become more favourable once there were more places to charge vehicles and the financial incentives to buy them increased. "When all these [recharging] things are ready and we see international oil prices rising, it's going to be like a snowball," he says.
Mr Lin agrees changes in the relative costs of new energy vehicles and their conventional alternatives were crucial. "Japan is one of the leading countries for selling hybrid and new energy vehicles," he says. "Government plays a huge role in that they subsidise very significantly to offset some of the high costs. "I think the Chinese government is very smart and when there are initiatives for companies ready to bring these products to market, there will be measures."
Makers at the show were also trying to secure interest in new conventional cars. Among the worldwide launches was an updated version of Volkswagen's flagship Phaeton saloon, a car that saw its sales in China rise 40 per cent last year to 1,400 vehicles. But in many markets the $60,000 Phaeton has struggled against rivals with more prestigious badges, such as the BMW 7-series, the Mercedes S-class and the Audi A8.
Even more expensive than the Phaeton was Ferrari's 599 GTO model, which the Italian car maker announced would be its fastest road car ever, thanks to a 6-litre engine that develops 670 brake horse power. Ferrari said the 599 GTO, of which 599 will be made, could reach 95kph from a standing start in 3.35 seconds, before going on to a top speed of 334kph. At the other end of the speed and price spectrum, Chevrolet unveiled a small hatchback called the Sail, which owner GM hopes will help it reach its 2 million sales target in China this year, up from sales of 1.83 million last year.
By 2015, the company hopes to have annual sales in China of 3 million units. email@example.com