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Exclusive: Toyota plans to roll into China's EV market in GAC Motor vehicle

Reuters  |  BEIJING 

By Norihiko Shirouzu

(Reuters) - Motor Corp is taking an unprecedented route to meet China's stringent green car quotas: its showrooms will sell an without the Japanese company's distinctive triple-oval logo.

Instead, it will feature the label of GAC Motor, Toyota's Chinese partner, and will be built around GAC's

The move - a first for - will give GAC access to the Japanese carmaker's stringent quality control, prestige and sales channel. For Toyota, it presents a quick way to meet Beijing's requirements that such vehicles represent 10 percent of an auto manufacturer's production by 2019.

According to two company executives familiar with the matter, plans to start selling the ix4 by the end of the year. The car is a battery-powered compact SUV based on GAC's GS4, and has been in development for two years.

Selling a car derived from a Chinese partner's vehicle would have been unthinkable just a few years ago. But the idea gained momentum at Toyota because of the Chinese government's push to get more on the road, the executives said.

The government mandates have spurred other new alliances, such as Ford Motor Co's agreement to develop with

Ford is waiting for regulatory approval for its partnership, which calls for designing and manufacturing several jointly developed no-frills EVs and selling them through a new China-only brand.

It wasn't immediately clear which parts of the ix4 Toyota would provide, or which company's design standards were used. Quality experts say GAC cars rate relatively high.

According to Jeff Cai, a Beijing-based at JD Power & Associates, some of GAC's cars, such as the GS8 corssover SUV, already stack up well head-to-head with vehicles marketed by global automakers.

"The GS4 is a good car with acceptable quality," Cai said. He added that the GS4 ranked No. 1 among Chinese brands and No. 3 among all brands for initial quality in the compact SUV category.

One question, however, is GAC cars' longer-term reliability and dependability, Cai said.

Under the new Chinese regulations taking effect next year, carmakers must amass credits for vehicles equivalent to 10 percent of annual sales by 2019. That level rises to 12 percent for 2020. New-vehicles are defined as all-electric battery and plug-in electric hybrid cars.

Although the ix4 gives Toyota a cheaper and quicker way to meet the quota, it also shows the company's anxiety about getting a toehold in the Chinese EV market before its own all-battery vehicle is available in 2020, industry officials and experts said.

"It's a to a critical issue all automakers face in China: how to meet the strict production quotas for electric cars," said James Chao, Shanghai-based head of consultancy

Until recently, Toyota was one of the industry's major hold-outs against full electrification. The company had planned to more or less skip battery-powered cars and turn instead to as a mainstream alternative to gasoline-fueled cars.

But China's seemingly inexorable drive towards electric cars changed that attitude.

At the auto show last month, Toyota unveiled plug-in electric hybrid versions of its and Levin, due to go on sale in 2019. The company is also developing an of its own, which the company has said should hit the market in 2020.

"All this means our partnership has entered a new phase," the second Toyota said.

The GAC-Toyota joint venture, established in 2004, has always produced and sold Toyota vehicles modified to sell in or China-only Toyota cars.

To be sure, industry officials and analysts believe cars such as the GS4 have been developed through studying global brands' cars, including those from its partners Toyota and Honda Motor Co.

Toyota is negotiating to execute a similar EV deal with its second partner, FAW Group, but nothing has been finalised, according to the first Toyota

Both executives declined to provide other details, including a target sales volume for the all-or a pricing strategy for it. assemble the vehicle at a factory in

The second said, however, that Toyota and would have to sell a "fairly sizable number" of ix4s to help the Toyota-GAC joint venture meet Beijing's quotas.

(Reporting By Norihiko Shirouzu)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, May 18 2018. 08:32 IST
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