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Toyota to provide China's GAC with hybrid system

By Nikkei Asian Review / Oct 16, 2020 11:24 AM / Business & Tech

Toyota Motor has decided to provide Guangzhou Automobile Group, a joint venture partner in China, with its gasoline-electric hybrid technology system, Nikkei has learned. This is the first time Toyota will offer its core hybrid technology to a foreign company.

The move follows a decision by China to include hybrid vehicles in the eco-friendly vehicle category under new emissions standards starting next year. At present, hybrid vehicles are treated in the same way as gasoline-powered ones. Japanese companies, including Toyota, hope to take advantage of the new rules to expand sales in China.

The hybrid technology will be provided to Guangzhou Automobile by BluE Nexus, a company jointly owned by Toyota, Denso and Aisin Seiki.

BluE Nexus, which develops and supplies drive systems for hybrid vehicles, has reached an agreement with Guangzhou Automobile on the technology transfer. The Japanese company is also believed to have agreed to offer the technology to Geely, a privately owned Chinese automaker.

Toyota already shares its hybrid technology with Japanese partners such as Mazda and Subaru.

Under the new emissions rules, hybrid vehicles will count as low-emission vehicles, making it easier for Japanese companies, which excel in hybrid technology, to meet China's tight emissions requirements. The rule change has also prompted Chinese automakers to adopt hybrid technology more broadly.

In an effort to expand the market for hybrid cars in China, Toyota has offered specific patented technologies free of charge since the spring of 2019. But that did not lead to a major shift to hybrid models, due in part to the difficulty of making them locally. This prompted calls for Toyota to make the entire hybrid system available to other manufacturers.

Toyota's market share in China remains around 6%, even after it sold a record 1.62 million vehicles last year. It sought to lift sales with the release of an electric vehicle this year, but sold fewer than 2,000 in the first eight months.

Toyota supplies hybrid vehicles in China through a local joint venture. The automaker has now gone a step further, offering a key technology to a Chinese company in which it has no ownership stake.

Japanese rival Nissan Motor is also beefing up its hybrid vehicle business in China before the new emissions rules take effect.

The company will release a model equipped with its ePower hybrid technology. Nissan intends to make hybrid versions available for five or six of its models over the next three years in China, including its hot-selling Sylphy sedan.

British research specialist LMC Automotive predicts hybrid cars will rise to26% of global sales in 2030, up from 7% in 2020. New emissions rules in Europe are also expected to boost demand for hybrid vehicles.

The share of electric vehicles is also expected to increase, as gasoline vehicles will be banned from the roads by 2035 in the U.K. and by 2040 in France.

In the U.S., the state of California has mandated that all new vehicles must be emissions-free by 2035, which may accelerate the shift to such vehicles, pushing their share in California much higher than the 16% currently forecast. Many predict that a move to zero-emissions vehicles, such as EVs and fuel-cell vehicles, is inevitable in the long term.

In light of the coming changes, Japanese automakers' survival will depend upon whether they are able to develop competitive electric models while hybrid vehicles are still on the market.

Contact editor Marcus Ryder (marcusryder@caixin.com)

Related: In Depth: Meet the Cheap Chinese Electric Car Selling Twice as Fast as Tesla’s Model 3


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