Photograph by Eric Thayer — Getty Images
By Kirsten Korosec
April 24, 2016

Toyota plans to sell two plug-in hybrid models in China in two years, the automaker announced Sunday ahead of the 2016 Beijing Auto Show.

The Japanese automaker says it will bring a plug-in hybrid version of the Corolla and Levin vehicles to the country. Toyota says it will “proceed with localization of plug-in hybrid vehicle development” ahead of the launch, language that suggests it will manufacture the upcoming models in China.

Plug-in hybrid electric vehicles combine a gas or diesel engine with an electric motor and a rechargeable battery. Plug-in hybrid electric vehicles, or PHEVs, have a longer range compared to conventional hybrids like the Toyota Prius, which do not have a battery.

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The announcement comes as major foreign automakers and China-based companies scramble to introduce electric vehicles, plug-in hybrids and fuel cell cars in the world’s largest auto market. China, which is plagued with chronic air pollution, is seen as a huge opportunity for alternative energy powered vehicles because the government there is pushing the technology forward with incentives for consumers and companies.

Toyota’s two plug-in electric hybrid vehicles will be going up against all-electric vehicles, which have historically received more incentives, like those made by China’s BYD and even U.S.-based Tesla (TSLA).

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Toyota has used China as a launchpad before. In 2005, Toyota selected China as the first location for production of the Prius outside of Japan. Five years later, the company established a center of research and development of hybrid technologies in China. Toyota has since opened two factories that make hybrid powertrain components: Toyota Motor Auto Parts and Sinogy Toyota Automotive Energy System Co.

The factories led to the 2015 launch of the Corolla Levin gas-electric hybrid vehicles in China. Cumulative total orders for both vehicles now stand at about 40,000 units, Toyota says.

Toyota may be hoping to take advantage of the Chinese government’s plan to shift funding from supporting electric vehicle production to rewarding companies that produce new technologies. The government has set a goal to have 5 million so-called new energy vehicles on roads by 2020 to reduce tailpipe emissions, which in turn should improve air quality.

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