Hybrids Prevail in the Short Term. LPG/CNG vehicles have been used in China for many years. The development of LPG/CNG is hindered by a lack of gas infrastructure and relatively unfavorable vehicle performance. Therefore, the application of LPG/CNG is limited to taxies and buses in several cities like Chengdu, Chongqing, Beijing and Shanghai.

Hybrids running on both electricity and gasoline, on the other hand, appear to be gaining momentum. At the 2009 Shanghai auto show, Chinese OEMs unveiled more than 20 hybrid models.

Frost & Sullivan says that hybrids, instead of being a temporary bridge technology will remain in the mainstream for quite some time in China. This is because the consumers are not fully aware of the advantages of battery electric vehicles and will slowly accept the technology. Hybrids—especially plug-in hybrids—ill help the public to have confidence to transit from hybrids to completely battery powered cars in the future. Moreover, pure electric vehicles require an extensive public charging infrastructure. It may take decades to construct the charging stations and infrastructure in China.

Electric Cars, the Next Movement. According to Tristin Lin, Senior Consultant from Frost & Sullivan, electric cars will be the next step after hybrids in China. Chinese OEMs have multiple incentives to develop electric vehicles.

• The Chinese Government has determined to turn the country into one of the leading producers of all-electric vehicles within three years, and making it the world leader in electric cars and buses afterwards. Having a successful electric car market will require the integrated efforts of various market participants.

  The Chinese Government will leverage the resources from the very top to support the development of the industry. According to government officials and Chinese auto executives, China is expected to raise its annual production capacity to 500,000 hybrid or all-electric cars and buses by the end of 2011.

• Chinese OEMs would also like to make intensive efforts to develop electric cars. While China lags far behind the United States, Japan and other countries in the manufacture of convenetioanlly-eneinged vehicles, the development of electric cars makes it possible for Chinese firms to circumvent the current technology and get a leap to the next stage. The leap to a new technology can be less burdened by legacy issues for the long term.

• From the customer’s perspective, electric cars have practical advantages in terms of Chinese customers’ driving behavior. Under rare occasion that Chinese drive a long distance between cities. Commutes are fairly short and frequently at low speeds because of increasingly heavy traffic. So the limitations of all-electric cars, for instance, the limited distance range are not a big deal.

Based on the technology of electric cars, eventually, China is going to move toward fuel cell vehicles, Frost & Sullivan says. The technologies of hybrid and electric cars will also be applied to fuel cell vehicles.

The key Question: When? The golden age of “green” cars will eventually come, but the key question is how long it will take until hybrid, electric cars and fuel cell vehicles can see a certain penetration in Chinese passage car market.

The first hybrid in China, the Toyota Prius, was introduced in 2006. However, the total sales of hybrid in Chinese market only amounted to around 2,100 units with limited models availability. Frost & Sullivan forecasts that hybrids will see mass penetration by 2011-2012 in China. The battery electric cars will start in 2010 and see gradual penetration in the next decade. For fuel cell vehicles, it will still be a long way to go in China market.