Japan Carmakers Start China EV Push With Tried and Trusted

(Bloomberg) -- To conquer the world’s largest electric-vehicle market, Japan’s car giants are starting by playing it safe.

Instead of betting on new models to lure Chinese customers, Nissan Motor Co., Toyota Motor Corp. and Honda Motor Co. are slapping electric motors on cars that are already doing well as gasoline versions. Those include the Sylphy sedan, a variant of which will be Nissan’s first China-made EV, introduced at the Auto China exhibition in Beijing Wednesday. Toyota is doing plug-in versions of long-time hits Corolla and Levin.

The move is aimed at meeting burgeoning demand for greener cars, as well as complying with the government’s production quotas for environmentally friendly vehicles. While the strategy saves in development and marketing costs, it risks leaving the Japanese companies looking unadventurous compared with fresh new models from China’s BYD Co. and Lynk & Co. and Tesla Inc.’s new mass-market Model 3.

“It’s not going to create any hype in the market, but it’s a practical approach,” said Yuzuru Ohashi, a consultant at Roland Berger. “If customers like the styling of a specific gasoline model, then some may choose the EV version of that car.”

Emission Policies

Under China’s so-called cap-and-trade policy, automakers must obtain a new-energy vehicle score -- linked to the production of various types of zero- and low-emission vehicles -- of at least 10 percent starting in 2019, rising to 12 percent in 2020. Carmakers including Volkswagen AG and Ford Motor Co. are all ramping up their EV production in China, even as demand for such vehicles is mostly concentrated in major cities where governments are doling out generous subsidies or giving free license plates.

Nissan, the biggest Japanese carmaker in China by volume, is testing Chinese consumers’ appetite for EVs with the Sylphy as it prepares to introduce 20 electrified models by 2022 in a bid to become the top brand in the market. The Sylphy sold more than 400,000 units in China last year, a sign of the model’s appeal, said Jose Munoz, the Nissan executive overseeing its China operations.

“Introducing the EV technology in the most popular model that we sell in China would be the best and fastest way to show our technology to our customers,” Munoz said in an interview. The electric version may contribute to 10 percent of Sylphy’s total sales in its life span, he said.

Toyota is set to launch plug-in hybrid versions of its top-selling compacts, the Corolla and Levin, in China in 2019 -- delaying the debut by a year to keep developing the vehicles. The carmaker will introduce a total of 10 electrified models in China by the end of 2020, Kazuhiro Kobayashi, Toyota’s head for the China region, said in Beijing.

Honda unveiled an electric concept based on its popular Vezel crossover model, targeting to start selling the car under its Everus brand this year as one of more than 20 electrified models it plans to launch in China by 2025. Subaru Corp. has also said it’s considering installing electric powertrains in current models rather than designing an all-new car.

China is poised to become Nissan’s single biggest market within five years, making up almost a third of its targeted revenue of 16.5 trillion yen ($152 billion) by 2022. The carmaker intends to spend 1 trillion yen in China over the next few years as it vies with global rivals including Volkswagen and General Motors Co.

The electric Sylphy uses a locally sourced battery that gives the car a driving range of 338 kilometers (210 miles) under Chinese testing standards. Nissan is also considering launching the new imported Leaf in China later this year, and the company will also soon introduce its hybrid technology known as “e-power,” Munoz said.

“It’s quite a commitment to this technology,” Munoz said. “This is going to be the only market for Nissan to have such a deployment of EV and e-power in such a short period of time.”

©2018 Bloomberg L.P.

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