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

* 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

SHANGHAI, April 18 (Reuters) - Toyota 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 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 high-end sedans, mid-range models from Volkswagen and Renault and sleek EVs from Chinese startups like and Xpeng.

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 through a joint research and development company they started last year.

The plan is to use BYD’s 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)

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