Japan's holdouts begin to embrace EVs

TOKYO -- Japanese automakers that never seemed interested in electric vehicles before are suddenly very interested.

Mazda and Subaru -- two of the industry's smallest players -- both now say they will launch EVs within five years, responding to regulatory pressure to roll out the expensive technology despite having hardly any electrified offerings on the road.

At the same time, Toyota Motor Corp. -- which until now has passed on EVs in favor of its pioneering pursuit of hydrogen fuel cell vehicles -- says it will launch an "in-house venture company" next month to start developing battery-powered eco-cars in a speedy, innovative way.

The three unrelated corporate moves indicate a new enthusiasm for EVs, despite their lackluster sales in the U.S. A growing number of automakers are embracing EVs as a solution to increasingly demanding emissions and fuel economy regulations around the world. But the Japanese industry's plans also signal a growing confidence that EVs will be accepted by more consumers around the world in the future.

"The overall industry is now shifting its electrification focus toward EVs," says Yasuyuki Yoshinaga, CEO of Fuji Heavy Industries, the company manufacturing Subaru cars. "We are in the age where we cannot just go on launching EVs only as regulation compliance cars."

Mazda will launch its EV in 2019, and Subaru's will follow in 2021.

The carmakers are offering scant details about the plans, but their executives say the rollouts respond to an immutable trend buffeting all makes, large and small. They say many details still are being decided, including what type of vehicles the EVs should be.

Both Mazda and Subaru are only beginning to confront the challenge of how to introduce affordable electric cars that deliver a long enough battery range to compete meaningfully with traditional gas-engine offerings.

To date, both of their electrified drivetrain developments are rudimentary at best, especially when compared with EV rivals General Motors, Nissan and BMW.

Neither Mazda nor Subaru currently sells an EV, though Mazda has a small fleet of electric Mazda2 subcompacts operating around its headquarters in Hiroshima.

Both are also neophytes when it comes to hybrids. Subaru sells only a hybrid version of its Crosstrek crossover. But that product falls short on fuel economy, Subaru's engineers concede, and Subaru is dumping it from the U.S. lineup.

Mazda offers a hybrid version of its Mazda3 small car, but only in Japan. And that car relies on a gasoline-electric system designed and engineered by Toyota.

Toyota itself has played the role of EV skeptic for the past several years. But in November, it conceded publicly that it needs electric vehicles.

Its new business unit will consist of just four people to start. Each of them will come from a separate Toyota Group company in a gambit to accelerate decision-making and get the cars to market quickly. One member will come from Toyota Motor, the others from key Toyota suppliers, Toyota Industries Corp., Aisin Seiki Co. and Denso Corp.

Toyota CEO Akio Toyoda said in a Nov. 17 release announcing the group that its small size is intended to permit "unconventional work processes" in a bid to accelerate new products and get them onto the market.

"As a venture company that will specialize in its field and embrace speed in its approach to work, it is my hope that it will serve as a pulling force for innovation," Toyoda said in the statement.

Toyota emphasized that it remains committed to developing a range of alternative-powertrain technologies, including hydrogen fuel cell vehicles, which it called the "ultimate eco-car."

But echoing comments made the previous week by CFO Takahiko Ijichi, Toyota's announcement said the company -- which doesn't have a single electric car in its lineup nor a publicized timeline for introducing one -- must react to changing regulations.

"Differing energy and infrastructure issues around the world and the rapid strengthening of regulations aimed at increasing the use of zero-emission vehicles have heightened the need for product lineups that can respond to various situations," the company said.

Both Mazda and Subaru promise their EV drivetrain systems will be developed in-house -- but with some caveats: Subaru says it will source batteries and the electric motor from outside while Mazda says it may lean on partner Toyota to jointly develop some of the necessary technologies.

Yet both also have a potential safety net in their relationships with Toyota. Toyota owns a capital stake in Fuji Heavy, and last year it inked a broad-ranging alliance deal with Mazda.

Toyota's own new interest in EVs stems from its need to respond to different regulatory demands in different markets, Ijichi said this month. His comments came after Japan's Nikkei newspaper reported that Toyota was planning to jump into mass production of long-range EVs by 2020.

According to the Japanese press report, Toyota will set up a team next year to develop EVs that can travel more than 186 miles on a single charge and sell them in Japan and other markets that promote EVs, including California and China.

Toyota did not give a timeline for launching an EV, but it signaled this year it was prepared to shift gears.

On the eve of the Beijing auto show in April, Hiroji Onishi, head of Toyota's China operations, said China's fuel economy regulations will make it tougher for the company to reach its sales goal in that country of 2 million vehicles by around 2025. The regulations are forcing Toyota to deviate from its product strategy centered on conventional hybrids, which don't qualify as "new energy vehicles" for regulatory credits in China.

To comply, Toyota eventually will have to introduce an EV there, Onishi said.

Toyota pulled the plug on its EV program in 2014, when it said it was ending a two-year deal to build electric Toyota RAV4 crossovers with Tesla Motors Inc. The same year, it said it would end deliveries of its pint-sized eQ, a battery-driven car based on the Scion iQ three-seater.

Toyota joined hands with Tesla, it said at the time, so the bureaucratic Japanese giant might glean some of the California carmaker's entrepreneurial spirit and fast, flexible mindset.

Regulatory pressures also are motivating Mazda, said Mazda Motor Corp. CEO Masamichi Kogai. Kogai said the automaker is introducing its EV specifically to meet California's zero-emission vehicle mandate. Several other states have also adopted mandates.

But beyond that, the coming EV will be a global offering, he said.

Mazda sees EVs evolving as both pure battery plays and range-extender setups, in which a small motor functions as an electricity generator to charge a battery that powers the motor.

For the time being, Mazda sees EV technology being deployed mostly in small cars while plug-in hybrid systems gravitate toward mid- to larger-size vehicles, Kogai said.

Kiyoshi Fujiwara, Mazda's global r&d chief, likened the strategy to that deployed in the BMW i3, which offers both battery-powered EV and range-extender versions.

"Just as with BMW's i3, our idea is that we offer a simple EV model and an EV equipped with a range extender. So, customers can choose either of them," he said.

Subaru also sees EVs as a long-term play, CEO Yoshinaga said. Plug-in hybrids will be the popular transition technology into the mid-2020s, after which point EVs gain more traction, he said.

"Research firms say the PHEV market will be bigger for the time being, but the EV market will be on the increase in the future, and we agree with that projection," Yoshinaga said. "Looking at the recent technology trend, I'd think EVs would be the mainstream."