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Toyota Motor Corp. President Akio Toyoda is taking the helm of a battery-powered vehicle project, accelerating the Japanese auto giant's effort to catch up to General Motors Co., Tesla Motors Inc. and Nissan Motor Co. in electric-car development.

Toyota, well-known for its leadership in hybrid vehicles that use batteries to assist conventional engines, has long been skeptical of the pure electric-vehicle market, investing instead in hydrogen fuel-cell research. Mr. Toyoda, who in the past also took over leadership of branding efforts at the Lexus luxury division, will lead a newly formed EV Business Planning Department alongside other executives.

The electric push follows Mr. Toyoda's move to boost autonomous-vehicle research efforts with a $1 billion investment and hiring spree in Silicon Valley. The world's largest auto maker in sales and profit, Toyota has considerable financial resources to pour into future engineering projects; meanwhile, its top rival, Volkswagen AG, faces billions of dollars in fines and settlement costs related to emissions-test cheating in the U.S.

Mr. Toyoda, grandson of Toyota's founder, envisions making cars that drive themselves on highways by 2020. Toyota, however, is likely to engineer cars that still keep drivers engaged in the operation of a vehicle—a strategy that departs from Alphabet Inc.'s Google car project.

While Google's pioneering work on autonomous cars has led to a frenzy of investment in driverless-vehicle research, electric-vehicle research also is thriving. Auto makers need to respond to emissions and other regulatory pressures that overshadow the current lack of strong demand for battery-powered vehicles like Nissan's Leaf or BMW AG's i3 small cars.

Even though Toyota has been more bullish on fuel cells—a technology that is not yet viable despite being under development for decades—the company appeared to have interest in diving into EVs several years ago.

Toyota was an early investor in Tesla, investing $50 million in the company in 2010—well before the launch of Chief Executive Elon Musk's popular Model S electric sedan. Toyota had an agreement to buy batteries from Tesla, but that ended amid disagreements between Messrs. Musk and Toyoda related to the merits of fuel-cell technology compared with batteries.

Toyota still plans to sell 30,000 fuel-cell vehicles a year by 2020, in time for the Summer Olympics in Tokyo. But it faces challenges. Delays in construction of hydrogen refueling stations in California, for instance, are hampering sales of its Mirai fuel-cell car.

Toyota recently said it would set up a new unit to build a battery-powered car and get it to market as quickly as possible. The move comes as sales of the Prius hybrid are declining in the U.S. and regulators in major auto markets around the world are pushing for more pure EVs as a way to lower vehicle emissions in the coming decade.

Electric vehicles currently represent less than 1% of global light-vehicle market share, but sales are growing due to hefty government subsidies in China, the U.S. and certain European markets, such as Norway. The incentives are particularly rich in China, where sales of electrics and plug-in hybrids have soared more than 80% in 2016 to 337,000—just a fraction of the 22-plus million passenger cars likely to be delivered in that market this year.

Other than Tesla, most auto makers have thus far offered electric cars with limited capabilities. Nissan's Leaf, for instance, can drive about 100 miles on a charge and GM's Chevrolet Volt travels about half that distance before kicking over to a gasoline engine that is also on board.

Concerns about range, combined with relatively high prices and limited charging infrastructure, have affected demand. The U.S. government's $7,500 EV tax credit is designed to ease those concerns, but with gasoline prices low buyers are flocking to heavier and more capable pickups, sport-utility vehicles and crossover wagons—leaving battery-powered vehicle sales just a sliver of the 17.5 million light vehicles expected to be sold in the U.S. this year.

GM will launch its 200-mile-range Bolt for $30,000 in California and Oregon next month, but it is unclear when that car will be widely available in the U.S. Volkswagen, Daimler AG and others have recently signaled sizable financial commitments to electrified vehicles, including a $4.5 billion push by Ford Motor Co. through 2020.

Others also hope to replicate Tesla's success. Silicon Valley startup Lucid Motors Inc., formerly known at Atieva, said this week it will invest more than $700 million to build an EV factory in Arizona with production is slated to begin in 2018.

That follows an ambitious plan by Faraday Future Inc., which is building a factory in Nevada.

Write to Sean McLain at sean.mclain@wsj.com and John D. Stoll at john.stoll@wsj.com

(END) Dow Jones Newswires

November 30, 2016 13:45 ET (18:45 GMT)

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