Toyota is in advanced talks to license hybrid engine technology to Geely to catch up in China

Toyota Motor Corporation is preparing to divulge details of the hybrid-car engine technology it pioneered with the Prius to China in an attempt to catch up with rivals in the world’s biggest auto market.

Chinese officials asked Toyota to share its gasoline-electric technology to help local companies meet stricter emissions targets, people familiar with the matter said, asking not to be named because the talks are private. Seeing this as a chance to make inroads in China, Toyota has engaged in advanced talks to license its hybrid system to Chinese carmaker Geely Automobile Holdings, two of the people said.

Government backing for hybrid vehicles would be a boon for Toyota’s ambitions to boost sales in China. Hybrids have been a success for Toyota in Europe and Japan for years, but China has so far placed more focus on so-called pure electric vehicles, promoting them through subsidies and tax breaks.

Gradually, though, China is starting to see hybrids as a means of reducing emissions on the way toward a pure-electric future, part of a plan to reach ambitious environmental goals and reduce the country’s reliance on imported oil. Trade tensions emanating from America are giving added impetus for Toyota and China to work together.

An increase in hybrids’ popularity could help Toyota catch up with sales leaders Volkswagen AG and General Motors Co., which each sold more than 4 million vehicles in China last year. Of the 1.3 million vehicles Toyota sold, about 10 per cent were hybrids. The company wants to raise that proportion to more than 30 per cent by as early as 2020.

Chinese carmakers that do not have hybrid technology are asking Toyota to work with them, and the company is considering several of them, said a Toyota executive, speaking on condition of anonymity. Toyota should be able to announce its stance officially within this year, the executive said.