• Bloomberg


Toyota Motor Corp. is preparing to divulge details of the hybrid-car engine technology it pioneered with the Prius to China in an attempt to catch up with rivals in the world’s biggest auto market.

Chinese officials asked Toyota to share its gasoline-electric technology to help local companies meet stricter emissions targets, people familiar with the matter said, asking not to be named because the talks are private. Seeing this as a chance to make inroads in China, Toyota has engaged in advanced talks to license its hybrid system to Chinese carmaker Geely Automobile Holdings Ltd., two of the people said.

Government backing for hybrid vehicles would be a boon for Toyota’s ambitions to boost sales in China. Hybrids have been a success for Toyota in Europe and Japan for years, but China has so far placed more focus on so-called pure electric vehicles, promoting them through subsidies and tax breaks.

Gradually, though, China is starting to see hybrids as a means of reducing emissions on the way toward a pure-electric future, part of a plan to reach ambitious environmental goals and reduce the country’s reliance on imported oil. Trade tensions emanating from America are giving added impetus for Toyota and China to work together.

An increase in hybrids’ popularity could help Toyota catch up with sales leaders Volkswagen AG and General Motors Co., which each sold more than 4 million vehicles in China last year. Of the 1.3 million vehicles Toyota sold, about 10 percent were hybrids. The company wants to raise that proportion to more than 30 percent by as early as 2020.

Chinese carmakers that don’t have hybrid technology are asking Toyota to work with them, and the company is considering several of them, said a Toyota executive, speaking on condition of anonymity. Toyota should be able to announce its stance officially within this year, the executive said.

As part of the discussions, Toyota is in talks to share its hybrid know-how and license the technology as a complete package via battery supplier Hunan Corun New Energy Co. to Geely and potentially other Chinese carmakers, the people familiar said. Corun works closely with Geely, which shot to the No. 3 spot in Chinese sales this year, topping all Japanese rivals for the first time.

Corun shares rose 1.6 percent in Shanghai.

“Hybrid is such a complicated system,” and can’t be copied simply, said Tatsuo Yoshida, an auto analyst at Sawakami Asset Management in Tokyo. “Toyota needs to also teach the partner how to optimize the hybrid system’s performance.”

Toyota has an open policy toward working with partners, which also applies to the area of so-called electrification technologies, a Toyota spokeswoman said. Talks with Geely about cooperating on hybrid technology are based on that policy, though nothing has been decided for now, she said. A Geely representative declined to comment.

A faster take-up of hybrid vehicles could help Chinese carmakers comply with new corporate average fuel-consumption regulations coming into force in 2020. Hybrid cars are typically more affordable than pure electric vehicles and aren’t subject to anxiety over driving range, potentially appealing to drivers who aren’t yet ready to move from gasoline engines to pure EVs.

As part of the evolving China-Toyota relationship, Chinese Premier Li Keqiang visited Japan in May and met with Toyota CEO Akio Toyoda. Li asked Toyota to cooperate on green technology, and the company advised China to embrace hybrids and not just focus on pure electric vehicles, the Toyota executive said.

Expecting rising demand, Toyota is ramping up hybrid battery production with Corun in China through their joint venture, Corun PEVE Automotive Battery Co. The venture will double production to about 210,000 battery packs annually in 2020. The companies are also in discussions to more than double that again to about 480,000 packs per year after that, according to one of the people.

“For Toyota it’s about having everyone use its hybrid system in order to make it the de facto standard,” said Koji Endo, an auto analyst at SBI Securities Co. in Tokyo. “To suddenly share technology with a company like Geely, which it has no prior relationship with, is a change of direction for Toyota.”

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