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Japan’s carmakers look for spark in EV market
When it comes to sales of pure electric vehicles (EVs), Japanese carmakers are playing catch-up. Now they have plans to claw back market share from China.
Japan is set to be surpassed by China as the world’s biggest exporter of cars in 20231, with EVs playing a large role in the surge.
China is the world’s leading EV producer and boasts the largest market, accounting for nearly 60% of all EVs globally2. The country’s stronghold on sector patents and dominance in battery supplies further solidifies its position3.
China’s BYD overtook Tesla in terms of pure EV sales in the fourth quarter of 2023, although it still trailed the US company for the full year. Tesla’s annual sales were 1.8 million vehicles, while BYD delivered almost 1.6 million4.
Japanese carmakers lagging
Nissan, Japan’s biggest EV producer, sold only 127,953 EVs (January to November) last year5. Toyota, still the world’s largest carmaker6, sold fewer than 25,000 EVs worldwide in 2022, and in the first eight months of 2023, sold just 65,0007.
Low sales appear to stem, at least partly, from a lack of domestic interest. Just 1.7 percent of cars sold in Japan were electric in 2022, compared with around 15 percent in western Europe, 5.3 percent in the US and nearly one in five in China8.
Looking ahead, global demand remains uncertain and there are concerns about the reliability and availability of charging infrastructure, which is vital to both public perception and the reality of EV performance.
However, Japanese carmakers have also been late in tapping into what demand there is. Toyota, for example, has long focussed on hybrids that combine battery power and internal combustion engines, an area it pioneered with the likes of the Prius9.
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Market share threat
EVs are becoming an increasingly important battleground in winning over new generations of car owners for future revenue streams.
Although Japanese carmakers dominate the domestic market, foreign EV sales in Japan jumped by some 60 percent in 2023, growing for the fifth consecutive year, according to the Japan Automobile Importers Association10. BYD, the leading Chinese automaker only entered the Japanese market in 202211 and is well positioned to capture significant market share from native Japanese producers in the near future. With their affordable pricing, Chinese EV makers are also gaining traction in markets like Thailand, that have hitherto been dominated by Japanese carmakers12.
Electrification is the (near) future
Between now and 2050, Lombard Odier expects the world to move from 20% economy-wide electrification to 70%, as entire sectors transition from fossil fuels to renewably generated electricity13. As part of this, Japan recently committed to transitioning to 100% electric car sales by 203514.
This transition could play a key role in the nation’s clean energy ambitions, not only by cutting emissions, but also by providing a nationwide battery pack that can help to balance electricity grids by smoothing out peaks and troughs in renewably generated electricity supply. At-home and vehicle-to-grid (V2G) EV batteries can be used to store excess energy at times when renewable production is high, and feed back to the grid when production is low or at moments of peak electricity demand, with smart-grid software controlling the process.
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Japan’s carmakers take action
With the 2035 deadline looming, Koji Sato, Toyota’s new chief executive, recently said EVs were the “missing piece” for the company and has vowed to make up lost ground15.
Toyota has set a target of increasing its EV sales to 1.5 million cars by 2026 and 3.5 million by 203016. It is preparing to ramp up production in the US and plans to rollout 10 new EV models in 2026. Meanwhile, in October 2023, the company announced a “technological breakthrough” in solid-state batteries, promising vastly longer range and quicker charging17.
The carmaker also recently took full control of a joint venture with Panasonic that produces EV batteries. Primearth EV Energy (formerly Panasonic EV Energy) is now a wholly owned subsidiary of Toyota – the company has said that Primearth will strengthen its ability to mass produce EV batteries18.
Honda, Japan’s second biggest carmaker, recently announced a new line-up of EVs to debut from 202619, and aims to have battery-powered and fuel-cell vehicles make up all its new car sales by 2040. Battery powered vehicles accounted for less than 0.5 percent of Honda's worldwide sales of about 2.8 million cars over the first nine months of 2023, coming to about 11,000 vehicles, according to company data20.
The carmaker has also begun production of electric vehicles in Thailand that it will start selling in the country in the first quarter of 202421, becoming the first Japanese company to produce passenger EVs in Thailand. (Toyota Motor also produces a small quantity of commercial EVs in the country.)
According to reports, Honda may also be considering a USD 18.4 billion electric vehicle and battery plant in Canada22, a move which signals the seriousness with which it and Japan’s carmakers are now taking the issue.
Nissan is planning to launch nineteen EV models globally by fiscal year 203023, and is aiming for 100% EV sales in Europe24. As such, the company is looking to increase investment in European EV and battery production and will invest in Renault’s new EV unit25. Nissan will outline its updated EV strategy in the next few months, as it seeks to gain market traction26.
Mitsubishi Motors, meanwhile, is also ramping up its EV investments, recently saying that it, too, would invest in Renault’s EV unit27. The company intends to sell EVs acquired from the unit in its primary markets, Southeast Asia, and Europe28. Mitsubishi is also reportedly planning to invest USD 375 million in Indonesia by the end of 2024 to expand manufacturing capacity and introduce new models29. Furthermore, it plans to launch its own EV models, including a new “commercial” EV for Japan30.
Strategies still working
Despite playing catch-up with regard to EVs, Toyota, Honda and Nissan all raised their operating profit forecasts for the current fiscal year on the back of strong sales generally31. Furthermore, the biggest selling EV in Japan last year was jointly developed by Nissan and Mitsubishi32, rather than BYD or Tesla.
But the traffic is now flowing one way – governments are under pressure to push through decarbonisation and the automotive industry will be at the forefront of this change. Firms that are quick to fully embrace the electrification opportunity may be better placed to benefit from the new revenue streams this transformation is creating, such as charging-as-a-service and over-the-air driver-assist digital updates33. Japan must take their history of excellence and sell it to the world anew if they want to drive the change.
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1 Russian Market, EVs Give China Fuel to Pass Japan as Top Car Exporter (voanews.com).
2 How China beat everyone to be world leader in electric vehicles (japantimes.co.jp).
3 Japan automakers falling behind China’s EV overdrive (asiatimes.com).
4 China’s BYD overtakes Tesla's electric car sales in last quarter of 2023 (reuters.com).
5 Nissan needs to ‘clean out the closet’ to turn around falling sales with new EVs (electrek.co).
6 Toyota remains world No.1 but its list of problems is growing (edition.cnn.com)
7 Japan’s automakers unveil EVs galore at Tokyo show to catch up with Tesla, other electric rivals. (apnews.com).
8 Japan auto show returns, playing catchup on EVs (macaubusiness.com).
9 Japan auto show returns, playing catchup on EVs (macaubusiness.com).
10 Electric Vehicle Sales in Japan Hit Record High in 2023, but Growth is Slow (tendata.com).
11 BYD blowing by Japan for Thailand’s EV market (asiatimes.com).
12 JAIA Chairman’s Press Conference Speech, January 2024 (jaia-jp.org).
13 Electrifying the Economy, under “electrification” section (Lombardodier.com).
14 Japan Transition to Electric Vehicles (trade.gov).
15 Toyota CEO sees EVs as ‘missing piece’ for world’s top carmaker (Bloomberg.com).
16 Chinese EV suppliers eye Japan as domestic competition heats up (kr-asia.com).
17 Toyota will engineer a half-electric renaissance (reuters.com).
18 Toyota to boost EV battery production with Primearth EV Energy buyout (electrek.co).
19 Honda unveils plans for new EV lineup (reuters.com).
20 Honda unveils plans for new EV lineup (reuters.com).
21 Honda becomes first Japan company to produce passenger EVs in Thailand (kr-asia.com).
22 Honda contemplates $18.4-billion EV and battery plant investment in Canada: report (electricautonomy.ca).
23 Nissan global EV sales surpass 1-million-unit milestone (evdesignandmanufacturing.com).
24 Nissan announces plan for 100% EV sales in Europe by 2030 (spglobal.com).
25 Nissan and Mitsubishi confirm investment in Renault's Ampere EV unit (arnaev.com).
26 Nissan needs to ‘clean out the closet’ to turn around falling sales with new EVs (electrek.co).
27 Mitsubishi Motors to end production in China, invest in Renault EV unit (reuters.com).
28 Nissan and Mitsubishi confirm investment in Renault's Ampere EV unit (reuters.com).
29 Mitsubishi to build EV in Indonesia (just-auto.com).
30 Mitsubishi Motors to Launch the New Minicab EV Electric Commercial Vehicle in Japan in December. (jcnewswire.com).
31 Booming profits bolster Japan automakers’ cautious EV shift (japantimes.co.jp).
32 Japan's bestselling EV isn’t a Tesla but a $13,000 minicar (japantimes.co.jp).
33 Electrifying the Economy, under “infrastructure” section (Lombardodier.com).
Important information
This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
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