Japan Lags in Electrified Car Market as Govt Sets New Target

The Yomiuri Shimbun

12:58 JST, December 7, 2020

The government’s decision to set a target of making all new cars electric or hybrid comes from concern that the global trend is rapidly moving away from gasoline vehicles, observers have said.

Should Japan fall behind Europe and the United States — as well as China, the world’s largest auto market — the nation’s economy will inevitably be affected, given that the car industry has long been Japan’s key industry, they said.

The Economy, Trade and Industry Ministry is expected to formally announce the electrification policy at a meeting of domestic auto giants and experts as early as Thursday, according to sources.

Electrified vehicles, which include fully electric vehicles and hybrids, account for about 40% of domestic new car sales, according to the latest data.

The government currently has a target of electrified vehicles accounting for up to 70% of new car sales by 2030, but its new goal is to stop selling new gasoline-powered vehicles by the mid-2030s.

A senior ministry official expressed strong determination to realize the goal Thursday, saying, “[This target] is the polestar.”

The accelerating global trend of “post-gasoline vehicles” has a prominent political dimension.

In February, the British government changed the year when its ban on gasoline vehicles will take effect from 2040 to 2035. Then in November, it moved the year up to 2030. It seems that Britain intends to take a proactive stance ahead of the 26th session of the Conference of the Parties (COP26) of the U.N. Framework Convention on Climate Change, which it will host next year.

In late October, Prime Minister Yoshihide Suga announced the goal of net-zero greenhouse gas emissions by 2050.

In order to achieve this goal, it is essential to reduce gasoline-powered vehicles that emit large amounts of carbon dioxide (CO2) and shift to eco-friendly vehicles such as hybrid and electric vehicles — regarded as default policies by the government and the auto industry.

A source close to the automobile industry said the current target is outdated as it was set 10 years ago.

There are big differences among regions and countries in the way they introduce electrified cars.

The U.S. state of California along with Britain, which lead the world in environmental policy, do not recognize hybrids as environmentally friendly vehicles.

Germany and France, for their part, are putting more emphasis on the development of electric vehicles — by providing subsidies as part of economic measures in response to the novel coronavirus — than on the development of technologies that entail a certain amount of gas emissions.

In contrast, a Chinese expert group considers hybrids important. The Chinese government has announced a plan for all new cars sold domestically to be electrified by 2035, with electric vehicles accounting for half of all new car sales and hybrids making up the rest. This stance results from its heavy reliance on thermal power generation, which emits carbon dioxide.

In the Japanese market, which took a leading role in the development of hybrid technology, hybrids account for more than 90% of all electrified vehicles, and the use of fully electric vehicles is not yet widespread among the general public.

Minicars, whose selling point is their affordability, account for one-third of new car sales, and this makes it difficult to shift to electric vehicles: If consumers replace their vehicles with hybrids, they could take on an increased burden of hundreds of thousands of yen.

“It’s not enough to go along with Europe’s strategy, which is centered on electric vehicles. Japan should follow a feasible road map based on its domestic situation,” said Takaki Nakanishi, an analyst and chief executive officer of Nakanishi Research Institute Co.

EV sales in Japan

Domestic automakers are rushing to promote their electrification strategies.

Nissan Motor Co. will launch its new electric car, the Ariya, which it positions as a global strategic vehicle, in 2021. It plans to increase the combined sales volume of electric vehicles and hybrid cars using Nissan’s unique technology, the e-POWER system, by about five times the current volume to 1 million units by fiscal 2023.

“We will expand our lineup of electric vehicles,” Nissan President and CEO Makoto Uchida said.

This year, Toyota Motor Corp. launched an electric vehicle for its luxury brand Lexus, and is developing an electric sport-utility vehicle with its capital partner Subaru Corp.

Honda Motor Co. released a mass-produced electric vehicle, the Honda e, this summer with an eye on the European market, which has strict environmental regulations.

However, Japanese carmakers have allowed their global competitors to take the lead in the development of electric vehicles. The best-selling Japanese electric vehicle is Nissan’s Leaf, with sales of approximately 66,000 units in fiscal 2019; U.S. electric vehicle giant Tesla sold about 360,000 units in 2019.

Some domestic manufacturers have called for the government to reinforce support measures such as by increasing the number of charging stations.

In November, the Japan Automobile Manufacturers Association requested that the government and the ruling parties provide tax breaks for eco-friendly vehicles and promote the installation of charging stations.

The focus for now will be on whether or not to exclude minicars and commercial vehicles from the government’s new goal, observers said. In particular, some manufacturers of minicars have expressed concern that electrification will raise the prices of their cars, which could decrease sales.

If the new car market in Japan shrinks as a result of stricter regulations, there are concerns that domestic automakers will increasingly move their production centers overseas, the observers said. They said it is believed the government intends to set effective targets while avoiding phrases such as “banning the sale of gasoline-powered cars.”