The move follows a decision by China to include hybrid vehicles in the eco-friendly vehicle category under new emissions standards starting next year. At present, hybrid vehicles are treated in the same way as gasoline-powered ones. Japanese companies, including Toyota, hope to take advantage of the new rules to expand sales in China.

The hybrid technology will be provided to GAC by BluE Nexus, a company jointly owned by Toyota, Denso, and Aisin Seiki.

BluE Nexus, which develops and supplies drive systems for hybrid vehicles, has reached an agreement with Guangzhou Automobile on the technology transfer. The Japanese company is also believed to have agreed to offer the technology to another Chinese automaker, Geely which is a privately-owned automaker.

Toyota already shares its hybrid technology with Japanese partners such as Mazda and Subaru.

Under the new emissions rules, hybrid vehicles will count as low-emission vehicles, making it easier for Japanese companies, which excel in hybrid technology, to meet China's tight emissions requirements. The rule change has also prompted Chinese automakers to adopt hybrid technology more broadly.

In an effort to expand the market for hybrid cars in China, Toyota has offered specific patented technologies free of charge since the spring of 2019. But that did not lead to a major shift to hybrid models, due in part to the difficulty of making them locally. This prompted calls for Toyota to make the entire hybrid system available to other manufacturers.

While Toyota supplies hybrid vehicles in China through a local joint venture with GAC Motor, the Japanese automaker has now gone a step further, offering a key technology to a Chinese company in which it was no ownership stake.