Insight: A tale of two carmakers: GM and Toyota take different electric roads in China

Wuling Motors Holdings

18/04/2021 08:00

* GM's Hong Guang Mini EV takes Chinese market by storm
    * Toyota aims to develop a small and affordable rival
    * Toyota to unveil new electric SUV at Shanghai auto show

    By Norihiko Shirouzu
    SHANGHAI, April 18 (Reuters) - Toyota  7203.T  pioneered the
world's most successful hybrid car but when it comes to pure
electric vehicles it has some catching up to do, especially in
China.
    The Hong Guang Mini EV, a tiny, no-frills car made by a
General Motors  GM.N  joint venture that costs under $5,000 is a
smash hit in the world's biggest car market while Toyota has yet
to launch its own small, low-cost electric vehicle in China.
    Toyota, the world's biggest carmaker, is set to unveil its
solution at the Shanghai auto show on April 19: a new universal
platform for electric vehicles (EVs) called e-TNGA that will
underpin an array of models from small runarounds to large SUVs.
    It will also display its concept electric mid-sized
sport-utility vehicle (SUV), based on the e-TNGA platform, which
is set to be sold worldwide within a couple of years, two people
familiar with Toyota's plans said.
    Toyota's executives have long called for a small electric
runabout but the fact it is going first with a mid-sized SUV is
a sign of the challenges it still faces to produce small,
low-cost EVs that are also competitive, comfortable and safe.
    With pressure growing on carmakers to slash emissions,
Toyota is scrambling to produce EVs that can compete globally
with the Mini EV, Tesla's  TSLA.O  high-end sedans, mid-range
models from Volkswagen  VOWG_p.DE  and Renault  RENA.PA  and
sleek EVs from Chinese startups like  NIO.N  and Xpeng  XPEV.N .
    While Toyota's Prius hybrid became a world bestseller, one
of its early efforts to develop a small EV, the eQ, was a flop. 
    After selling about 100 eQs in 2012, Toyota ditched it due
to concerns about the limits of EVs, such as their high price,
short range and long charge time. 
    The eQ, an electric version of Toyota's mini iQ, cost 3.6
million yen ($33,000), roughly the price of its mid-sized Camry.
    
    COST CONTROL
    One key issue in developing an affordable, small EV is the
need to use electric powertrains that have yet to achieve parity
with their gasoline counterparts, the people familiar with
Toyota's plans said. 
    Cramming bulky batteries into a tiny car is another
challenge. 
    Many EVs have high floors because the batteries are stacked
underneath, leaving automakers the choice of making cars much
higher to give passengers ample room, or keeping them lower and
sacrificing comfort, the sources said.
    Toyota doesn't want to compromise on quality, comfort or
performance with its small EV, but it is aware it needs to
develop expertise in slashing engineering costs to deliver such
a vehicle with a price well under $20,000.
    That expertise is precisely what GM leveraged to make the
Mini EV, which can cost as little as 28,800 yuan ($4,410).
    Its joint venture, SAIC-GM-Wuling (SGMW), is the biggest
manufacturer in China of no-frills commercial vans that start at
about 30,000 yuan and it tapped that cost-control know-how.
    "Wuling basically has simply had to replace gasoline engines
in those commercial vans with simple electric powertrains," said
Yale Zhang, head of consultancy Automotive Foresight.
    He expects sales of the the Mini EV and its upscale Macaron
version to hit 500,000 this year.    
    Zhou Xing, a SGMW vice president in charge of Wuling and
Baojun sales and marketing, said it was set to roll out four
small EVs by early 2022 under its brands, taking the model range
to 10 just as more rivals enter the market.
        
    NATIONAL PRIDE
    The Mini EV also cuts corners that would not be allowed in
the United States or Europe, underlining the challenge Toyota
faces in developing a viable rival that handles easily in a
crowded city and is still high in quality and performance.
    The Mini EV only has one air bag, for example, with none for
passengers or on the sides to protect occupants if it rolls.
    The car has an anti-lock braking system but no stability
control technology even though its relatively tall, stubby
profile makes it prone to tipping over when cornering sharply at
speed, two people familiar with its development told Reuters.
    "First of all, the product meets all the vehicle safety
requirements of China. The Hong Guang Mini EV is basically a
commuting tool, helping people go from point A to B in city
traffic. It's highly unlikely for them to drive this car at high
speeds," said SGMW's Zhou.
    The no-frills approach certainly hasn't dented its appeal. 
    Launched in July, cost-conscious Chinese customers and
young, fashionable urbanites are snapping up about 100,000 Mini
EVs a quarter, making it one of the top EV sellers in China.
    Some younger drivers are buying it and other Wuling cars in
part after a video of a Wuling van racing deftly on a twisty
mountain road went viral. For many, seeing a basic Chinese van
doing tricky manoeuvres tickled their national pride.
    "I am proud of what Chinese-made vehicles like Wuling
workhorse vans can achieve," said Huang Peixian, 26, a small
business owner in the city of Shantou in Guangdong province. 
    "When I saw the Hong Guang Mini EV, I thought this could be
a good car for me," she said. "I'm not just attracted to the car
because of its cheap price, it's really fun to drive."
    Many drivers personalise their Mini EV's with a new paint
job and sleek head and tail lamps. A few are even customising
their other cars, such as Audis and BMWs, with Wuling stickers
and badges.
    Huang went all out, turning the interior of her Mini EV pink
and splashing characters from Japanese cartoon series Chibi
Maruko-chan on the white exterior.
    
    GREEN CREDIT BOOST
    Toyota's electric SUV will be the first car produced by its
new zero emissions vehicle design division in Japan, known as
ZEV Factory. 
    To get the low-cost know-how it needs, however, it has
turned to Chinese battery and automaker BYD  002594.SZ  through
a joint research and development company they started last year.
    The plan is to use BYD's  1211.HK  expertise in building
small EVs and some key components, including batteries. 
    But there is still a good chance Toyota will use electric
powertrain technology - a combination of the motor, inverter and
gears - called e-Axle made by its affiliate BluE Nexus,
according to one of the people familiar with Toyota's plans. 
    The Hong Guang Mini EV also plays an important role for GM
and SAIC as it generates green-car credits. Automakers in China
need to make enough New Energy Vehicles (NEV) to earn credits to
offset their production of combustion engine cars. 
    The success of the Mini EV means GM and SAIC have the scope
to sell credits to rivals or produce more, bigger, luxurious
gasoline vehicles without being penalised.
    Automotive Foresight's Zhang also said the green-credit
system means the Mini EV can be priced very competitively to the
point it barely makes a profit.
    SGMW's Zhou declined to say whether the Mini EV makes money,
or how much it earns from green credits.
    "We have seen quite a few companies come to us and buy
credits from us. But we don't want to disclose who they are," he
said.
    The two sources familiar with Toyota's plans said it was not
planning to lose money on the retail price of its small EV or
leverage green credits to make it more competitive.
    A company spokesman declined to comment on whether Toyota
had enough Chinese NEV credits, or if it would consider selling
them as an integral part of its strategy.
   ($1 = 108.9200 yen)
   ($1 = 6.5280 Chinese yuan renminbi)

 (Editing by David Clarke)