Daimler AG Chief Executive Dieter Zetsche disclosed a relatively measured outlook

Mr. Zetsche told an industry conference in Shanghai over the weekend that demand for all-electric cars and plug-in hybrids is most likely to total only about 1% to 5% of total vehicle demand globally by 2020.

It is a 'slow transition,' Mr. Zetsche told the forum at China Europe International Business School in Shanghai Saturday, citing the high cost and limited range of electric cars as factors hindering a more rapid spread of the technology.

Still, Mr. Zetsche said, the German auto maker plans 'to invest heavily' in the alternative-propulsion technology to prepare for the expected era when electric cars become a primary mode of transportation, especially in crowded cities.

Mr. Zetsche's outlook was relatively more pessimistic than that of early electric-car adapters such as Nissan Motor Co. of Japan. Nissan's CEO, Carlos Ghosn, has said demand for electric vehicles, such as its Leaf electric car, could amount to as much as 10% of global demand for cars and other light vehicles by 2020. Nissan plans to expand global production of the Leaf to as many as 500,000 vehicles a year by 2012.

Nontheless, Daimler's measured view is one shared by others who spoke at the Shanghai conference.

Franco Amadei, chairman of the China unit of Italy-based Fiat SpA, said electric cars aren't hype, and that it is only 'a question of time' before they become a popular mode of transportation.

But he added that internal-combustion engines are still likely to dominate the industry for the next 20 to 30 years, and he stressed the importance of improving gasoline engines' efficiency and making them smaller and more powerful.

Cost is especially a 'big challenge' facing the future of electric cars, said Carl-Peter Forster, CEO of Tata Motors Ltd. of India.

Daimler's Mr. Zetsche said, however, that even though demand for electric cars is likely to remain small, the German company is making a series of bets on the vehicles, most notably its decision this year to tie up with Chinese battery and auto maker BYD Co. That joint venture, Mr. Zetsche said, is progressing 'according to plan.' BYD and Daimler, which owns the Mercedes-Benz marque, are expected to invest 600 million yuan ($90 million) in the equally owned partnership.

The German auto maker's first project to develop an all-electric-battery car for the Chinese market -- part of a broader effort to develop a joint electric-car brand for the Chinese market -- is nearing so-called styling freeze, which refers to a stage in the car-development process where engineering and styling specifications are set firmly. Normally it takes about two years for an experienced global auto maker to complete the development process and launch the vehicle after the styling freeze.

Meanwhile, Tata's Mr. Forster said at the Shanghai forum that Jaguar Land Rover, a unit of the Indian vehicle maker, is in talks with a Chinese auto maker to establish a manufacturing and sales joint venture in China to boost the two-brand company's small presence in the country's fast-growing auto market, the world's biggest since last year.

The Tata executive said Jaguar Land Rover wants to find a partner in China 'as soon as possible' to manufacture and market vehicles here. He said the company is in 'good discussions' with a Chinese auto maker, but declined to name the potential partner.

Tata believes the Jaguar and Land Rover brands, which the company purchased from U.S.-based Ford Motor Co., have 'tremendous potential' around the world, he said. But 'let's be honest, they have been somewhat undermanaged' for some time, even though the brands are attractive, he said.

'We're not as strong as we should be [in many markets], most notably in China,' Mr. Forster added.

China's auto market, which expanded about 50% last year to overtake the U.S. as the world's biggest auto market, is likely to continue to grow in the medium term, albeit more slowly. Kevin Wale, head of operations in China for U.S.-based General Motors Co., said last week that China's domestic auto market could reach sales of more than 17 million vehicles this year and 19 million next year.

The sales forecasts that Mr. Wale offered Thursday in Shanghai are up sharply from the 13.7 million vehicles that auto makers sold in China last year. With China's booming economy raising personal incomes, the country's auto market will likely continue to offer a 'tremendous upside potential,' Mr. Wale told a group of reporters on Thursday evening.

He predicted that China is likely to retain its status as the world's largest auto market for the foreseeable future.

Mr. Zetsche said at the conference that automobile sales in China might reach 20 million to 30 million vehicles by 2020.

Meanwhile, the president of China's state-owned Changan Automobile Co. told the auto forum on Saturday that China's highly fragmented auto industry needs to be consolidated. The executive, Zhang Baolin, said about 160 auto makers produce cars in China.