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NOT A TYPO: One Toyota Prius Was Sold in China Last Year

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Ed Begley, Jr. may love his Prius more than life itself, but Toyota's great green hope isn't going over particularly well in China.

As Jonathan Watts, the Guardian's Asia correspondent, wrote last week:

I am starting this post snared in traffic on Beijing's third ring road, breathing exhaust fumes and taking it on faith that the sun is up there somewhere behind the smog.

It is a fitting location to expunge a little car-related angst prompted by some stunning car industry statistics that have emerged in the past few days.

[...]

First, the number of cars on the planet has just passed the billion mark. Second, almost half of the new growth is in China. Third, Toyota managed to sell only one Prius in China last year. That's right. The world's most commercially successful hybrid car has found only one buyer in the fastest growing market. SUV sales, by contrast, are surging.

No, that's not a typo. One -- yes, ONE -- Toyota Prius was moved off the lot in China during all of 2010.

It seems that Toyota has long had difficulty putting Prii on the roads of the world's second-largest consumer market.

Here's what BusinessWeek's Ian Rowley had to say about the car's lack of success among Chinese drivers back in 2007:

Despite much fanfare surrounding the launch of the Prius in December 2005, the locally made gas sippers are yet to catch the Chinese public’s imagination. Speaking at a recent Toyota event at the Imperial Hotel in Tokyo, Toyota executive vice president Takeshi Uchiyamada admitted sales are falling along way short of expectations. Uchiyamada said that Toyota only sold 2,000 Prius last year in China -- half the original plan -- and that sales closer to 500 were likely this year.

So, what's holding the Prius back? Again, here's Rowley:

It’s not hard to spot the problem. Thanks to high duties on imported parts used in the assembly of the Chinese Prius at a plant in the north eastern city of Changchun, the hybrids went on sale at $36,000. That’s about $15,000 higher than the equivalent price in Japan or the U.S. and enough to put off even the greenest of Chinese auto buyers from ordering a new Prius.

Another possibility was floated by Andrew Leonard, of Salon's "How the World Works" section, last September:

Never mind all those panda-semen-extraction-gone-wrong conspiracy theories. If the New York Times' ace China correspondent Keith Bradsher is to be believed, China has has halted exports of rare earth elements to Japan, in protest of its neighbor's detention of a Chinese fishing boat captain.

A spokesman for China's Ministry of Foreign Trade and Economics is denying that any such trade embargo exists, but Bradsher's article makes a convincing case that some kind of message has come down from on high to restrict the flow of minerals. Regular readers of HTWW will understand the significance of the move. Rare earth elements play an extraordinarily important role in the high tech, clean energy economy -- as well as advanced military technology such as missile guidance systems.

The Prius, for example, depends heavily on the rare earth elements neodymium and lanthanum. Last year Reuters reported that each Prius motor "requires 1 kilogram (2.2 lb) of neodymium, and each battery uses 10 to 15 kg (22-33 lb) of lanthanum." China controls 90 percent of the production and processing of neodymium.


Electric hybrid cars are apparently a tough sell across the board, as the Wall Street Journal reported yesterday that "Warren Buffett-backed Chinese battery producer and auto maker BYD appears to be running short of funds to carry out its ambitious plans for electric cars and other 'green' technologies."

And, even if electric cars were to somehow catch on, Peter Hessler, staff writer and former China correspondent for The New Yorker magazine (and author of Country Driving: A Journey Through China from Farm to Factory) believes widespread adoption of the Prius/Nissan Leaf/Chevy Volt/et al could do China more harm than good.

When Bob Moon of NPR's Marketplace asked Hessler if the Chinese government might somehow try to boost demand for cars like the Prius, Hessler replied:

Well, I'm not even sure if that would be a great idea right now, because to be honest, I mean, they boost the green cars and then you have more electricity use. And where is the electricity coming from? In China, it's overwhelmingly dominated by coal. And after that, you have a lot of hydropower, which is not a great thing. I live in the Three Gorges region, and so, two million people were relocated, entire cities that I remember are now gone. So you realize this is a staggering challenge.

Meanwhile, Toyota is still climbing out from the hole it found itself in, what with numerous recalls as well as a string of disasters that affected most all Japanese businesses.

At the Shanghai Auto Show in April, Masayoshi Hori, the automaker’s executive coordinator for China, said, "while Toyota would like to increase its market share, the company is focused on improving vehicle quality, service and customer satisfaction."

However, Hori explained, “We’re not in the business of prioritizing market share."

Well, given Toyota's 2010 Prius sales, perhaps it's, um...time to start?
POSITION:  No positions in stocks mentioned.

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