Honda is working on a pure electric variant of the Honda XR-V, recent spy shots and a report released by auto.163.com reveal. The Honda XR-V is the Chinese version of the globally sold Honda HR-V made by the Dongfeng-Honda JV.

Honda was not into EVs previously, hybrids and fuel cells were its areas of expertise. However, the company has started responding to the growing market for pure electric vehicles with the debut of the Honda Clarity EV last month at NYIAS 2017. For China, the company is working on a smaller and affordable EV based on the XR-V.

While the incentives from the central and local Chinese governments motivate automakers to start selling or increase their range of EVs, they are in a way compelled to do it. That is because the government incentives will eventually be replaced by an EV quota trading scheme. Instead of increasing the market for EVs by offering incentives, China’s long-term plan is to make making green vehicles mandatory for companies.