China Won’t Let Toyota Ditch Its Electric Cars

Beijing wants plug-ins. So automakers roll out new models

Photographer: Kiyoshi Ota/Bloomberg

Toyota Motor has made its view loud and clear: Hydrogen-powered cars are the future. That’s why the world’s largest automaker pulled the plug last year on the all-electric RAV4 EV crossover it developed with Tesla Motors. China, the world’s largest auto market, isn’t listening.

The government has begun a strategic initiative to build electric cars on the mainland and is encouraging foreign manufacturers and their local partners to get with the program. So as many as 40 electric models will go on sale in China this year—triple the number available two years ago—as automakers hew to the policies, Bloomberg Intelligence estimates.

“It is the cost of entry of being here,” James Chao, managing director of IHS Automotive in Shanghai, says of the joint-venture electric vehicles. “A lot of it is kind of for show, and they just want to please the government.”

Toyota will roll out the Leahead and Ranz all-electric brands with its China partners Guangzhou Automobile Group and FAW Group starting this year. The models will make China the only market where Toyota sells EVs.

“They’ll do some token launches and token sales, but I’m not expecting any waves,” says Ashvin Chotai, managing director of researcher Intelligence Automotive Asia, who advised Mercedes-Benz owner Daimler and China’s BYD on their Denza electric-vehicle brand for China. “This is just a distraction, an unwanted headache.”

Carmakers say marketing an EV has become a necessity for those trying to win government approval to build factories. China’s new auto fuel economy standards also call for a 28 percent drop in average per-vehicle fuel consumption by 2020—something likely to happen only if plug-ins are embraced. Toyota has shown guarded support in its public comments about electric cars in China. Company spokeswoman Kayo Doi says it will develop hybrids, plug-in hybrids, fully electric cars, and fuel-cell vehicles to offer a range of options to Chinese customers.

The chief engineer of Toyota’s Mirai fuel-cell vehicle strayed from that company line in mid-April. At a test-drive with reporters in Yokohama, Japan, Yoshikazu Tanaka said the usefulness of EVs is dependent on quick-charging stations that are too taxing on local electric grids. “I don’t think such cars will become popular,” he said. But Hiroji Onishi, Toyota’s chief executive officer for the China region, said on April 21 that because President Xi Jinping is accelerating the EV push, “we believe infrastructure including charging stations will be developed quite rapidly.”

In markets including the U.S. and Japan, Toyota is betting its long-term clean-car future on the hydrogen-powered Mirai, which emits only water. The carmaker also continues to champion the gasoline-electric hybrid technology it pioneered with the Prius.

At the Shanghai auto show in late April, the Mirai was placed on a stage at the center of Toyota’s stand while cars from the two local all-electric brands were relegated to the edges of its display area. Chairman Takeshi Uchiyamada, chief engineer of the original Prius, unveiled two made-in-China hybrid compact cars without a word about EVs.

Besides Toyota, other China EV ventures in the works include Volkswagen and SAIC Motor’s Tantus, Hyundai Motor and Beijing Automotive Group’s Shouwang, and BMW and Brilliance China Automotive Holdings’ Zinoro. Those additions may help China put 1 million to 2 million electric vehicles and other so-called new energy vehicles on its roads by 2020, estimates Andreas Graef, principal at A.T. Kearney in Shanghai. That’s short of the country’s 5 million target.

Even if electric vehicles take off, the new, unknown joint-venture brands have little chance of winning over large numbers of regular consumers to their EV models, says Steve Man, a Hong Kong-based analyst at Bloomberg Intelligence. So those cars are probably destined for China’s local governments and utility companies, he says.

—With Masatsugu Horie

The bottom line: China wants electric cars to be produced on the mainland. So automakers will offer as many as 40 plug-in models this year.

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