A Subaru Solterra electric sport utility vehicle

Subaru on Thursday unveiled its first all-electric vehicle, the Solterra, the result of a two-year joint development project with its biggest shareholder, Toyota.

The SUV launch comes amid accelerating demand for EVs as nations around the world tighten environmental regulation to cut carbon emissions. Toyota last month announced its version of a battery electric vehicle, the bZ4X.

The technological shift away from internal combustion engines poses a challenge for smaller carmakers, such as Subaru, that are less able to fund expensive development of EVs. At the same time, it is an opportunity for top-tier automakers, such as Toyota, to draw smaller rivals closer.

“The EV market is not mature yet, so we will respond to it by deepening our cooperation with Toyota,” Subaru CEO Tomomi Nakamura said during a launch event.

For now, he said, the Solterra would be built by Toyota in Japan and Subaru may move production to its main market, the United States, when it had sufficient sales volume.

Toyota (TM), a pioneer of hybrid electric cars but a latecomer to the full EV market, plans to have a line-up of 15 BEV models by 2025. It is also spending $13.5 billion over the next decade to expand auto battery production capacity.

Vehicle sales at Subaru are less than a tenth of those at Toyota, the world’s bigges