China's strict policies to push clean-energy cars have challenged all global automakers, but perhaps none more than Toyota.
The Japanese giant had been one of the industry's major holdouts against full electrification and planned to de-emphasize battery-electric cars in favor of hydrogen as an alternative to gasoline-fueled vehicles.
But late last year, Toyota said it had begun developing a long-range electric vehicle, and it put its president, Akio Toyoda, in charge of a new unit called the EV Business Planning Department.
One Toyota executive, who asked not to be named, said the strategy about-turn was "agonizing" and "heart-wrenching."
In September, Chinese policymakers drafted a proposal to require 8 percent of automakers' sales to be EVs or plug-in hybrid vehicles in 2018, rising to 10 percent in 2019 and 12 percent in 2020.
"Those mandates are tough to the point it could wreck our fundamental business case," said another Toyota executive.
Said another company official: "The Prius and other hybrid cars are central to our green-car strategy. But in China's view, the Prius is no more than a gasoline car. We have no choice but to get over our EV allergy and come up with an electric car."