Government Plans to Raise Eco-Friendly Car Subsidies from April; Japanese Manufacturers Using ‘Green Steel’ Able to Receive Up to ¥50,000

The Yomiuri Shimbun

21:00 JST, January 29, 2025

The Economy, Trade and Industry Ministry plans to raise subsidies for purchasers of electric vehicles and other eco-friendly cars by up to ¥50,000 from April.

The subsidies will be applicable to automakers that use so-called green steel in their cars. Green steel refers to steel produced while minimizing carbon dioxide emissions.

To reduce CO2 emissions in operation as well as production processes, the ministry will encourage steel suppliers to invest more in decarbonization measures.

The ministry officially announced the policy on Monday.

The increase will apply to automakers that submit procurement plans along with predicted percentages of green steel use until fiscal 2030.

The ministry expects that almost all Japanese automakers will submit plans. The ministry will evaluate the plans by the end of March and decide on the amount of the subsidies during fiscal 2025; actual procurement records will be reviewed in and after fiscal 2026.

Currently, the government’s subsidies for eco-friendly cars are up to ¥850,000 for EVs, ¥550,000 for mini EVs and plug-in hybrid vehicles (PHVs), and ¥2.55 million for fuel cell vehicles.

Up to ¥50,000 will be added to each under the new scheme.

Thirty percent or more of Japan’s CO2 emissions come from the industrial sector, with steel makers accounting for the most at about 40%.

Twenty percent or more of domestically produced steel is used in car manufacturing. If steel makers increase green steel production, it can contribute to reducing CO2 emissions.

However, green steel requires high costs for development and capital investment, making automakers cautious about green steel raising production costs. Steel makers are also reluctant to proactively invest in making green steel production a reality.

The ministry believes if automakers implement more green steel, it will allow for steel manufacturers to make investments.

CO2 emissions from automobile manufacturing are being increasingly monitored all over the world.

From 2026, the EU will require automakers voluntarily report their CO2 emission levels.