NAGOYA -- Toyota Motor is in discussions to provide hybrid technology to China's Zhejiang Geely Holding Group, a sign that it is intent on solidifying its strategic position in a market it believes will enjoy strong demand for hybrids for some time before autos go all-electric.
The Japanese company said on Friday it is in open-ended discussions about electrification technology with Geely. Specifics of cooperation were not revealed, but Toyota will likely license such hybrid-related technologies as motors, power converters and batteries to Geely and provide advice.
Toyota already operates joint ventures with Chinese automakers FAW Group and Guangzhou Automobile Group. The latest news highlights its clear focus on China.
The Aichi Prefecture-based automaker aims to sell more than 5.5 million electrified autos a year by 2030, including hybrids, plug-in hybrids and pure electrics. This amounts to half of its global sales. Hybrids and plug-in hybrids are expected to account for 4.5 million units.
Hybrid technology is a particular strength of Toyota, which has thoroughly reduced costs across its supply chain to make the vehicle category affordable. A Prius hybrid now starts at about $22,000. "Only once they are widely used do green vehicles become meaningful," an official said.
Amid the global electric-vehicle boom, China will require "new-energy vehicles" to account for a set proportion of output at each automaker, starting next year. Electrics and plug-in hybrids are considered new-energy vehicles, but hybrids are not.
But Toyota expects another key environmental regulation, corporate average fuel economy standards, to lead to increased hybrid demand for the time being. Such markets as China, Europe and the U.S. have adopted these standards, which set a floor on the average fuel economy of all models sold by each automaker. This will give an advantage to automakers with strong sales in hybrids or smaller cars.
China is scheduled to tighten its CAFE requirement in phases through 2020, to 100 km per 5 liters -- matching Japan's level. With more governments moving to adopt CAFE regulations, around 30 countries are expected to have them in place by 2020.
Toyota sold 1.29 million new autos in China last year, none of them fully electric. Hybrids, meanwhile, accounted for around 10%. The company seeks to raise their share to at least 30% to 40%.
For the longer term, Toyota will bolster electric vehicles in China. It will roll out a new model in 2020 in China ahead of any other market. A joint venture with Guangzhou Automobile Group recently began producing electrics under the Chinese partner's brand.
Geely, a private-sector automaker that owns Sweden's Volvo Car, has been working with Toyota group parts maker Aisin Seiki to set up a joint venture on automatic transmissions. It has actively sought future-generation technologies from global automakers of late. In February, it became the top shareholder in Daimler -- acquiring a nearly 10% stake for about 7.3 billion euros ($8.43 billion) -- with hopes of tapping the German company's expertise in electric-car batteries and elsewhere.