TOKYO -- Changing environmental regulations are redrawing the map of the auto industry, with automakers that are focusing on electric cars positioned to benefit the most.

Toyota Motor's announcement of plans for two plug-in hybrids at the Beijing International Automobile Exhibition in April marked a strategic shift. China's government had decided to offer generous purchase incentives covering plug-in hybrids and electric cars, but not the conventional hybrids that have been Toyota's strong point.

Though the Japanese automaker had just rolled out a new hybrid with key parts produced locally -- at the Chinese government's request -- it had no choice but to respond to the change. China was the world's largest market for electric vehicles and plug-in hybrids last year, with sales quadrupling to 330,000 units thanks to the subsidies. Toyota sells a paltry 30,000 conventional hybrids there annually.

The company faces a tough test in the U.S. as well. California, the country's biggest auto market, will stop counting conventional hybrids toward the state's eco-car sales requirement starting with models rolled out in 2017. Environmentally friendly vehicles such as electric and fuel-cell cars must account for a certain portion of automakers' sales, with the percentage to rise each year, reaching 22% in 2025. Companies that fall short are fined or forced to buy credits from automakers that exceed the requirement.

Toyota launched the Mirai, the world's first mass-produced fuel-cell car, in late 2014, but production capacity is limited. The automaker became a buyer of credits for the first time last year. Meanwhile, American electric-car specialist Tesla Motors earned $57 million in the January-March quarter just from selling credits, with Toyota believed to be among the buyers.

A single new rule can shift the industry's balance of power. Regulations can be used in encouraging automakers to compete to develop game-changing technologies, or in helping a country's auto industry thrive by sapping foreign rivals' momentum.

The U.S. enacted the Clean Air Act in 1970, introducing emissions regulations considered the world's toughest. The auto industry argued at the time that the law's requirements would be impossible to meet. But Honda Motor became the first to pull it off with the development of the CVCC engine. This feat helped Honda, a latecomer to the global market, make great strides beyond Japan.

Nearly half a century later, Nissan Motor is moving aggressively to adapt to changing regulations under President Carlos Ghosn. The Japanese automaker agreed to invest substantially in Mitsubishi Motors just three weeks after the latter became embroiled in a scandal over minicar fuel-efficiency data. Ghosn cited the smaller automaker's brand power in Southeast Asia as a reason for the deal. But Nissan also wanted Mitsubishi Motors' plug-in-hybrid technology.

Volkswagen has vied with Toyota to lead the global auto market, touting fuel-efficient diesel engines as another clean option. But the German automaker was found last year to have cheated emissions tests, letting some of its diesel cars spew out higher levels of nitrogen oxides than legally allowed. VW recently agreed to a $14.7 billion settlement in the U.S. The scandal came amid alarm over increasingly tough environmental regulations and relatively slow progress on electric vehicles, an area where the automaker is now scrambling to catch up.

(Nikkei)