“Chinese and American companies leading the global electric vehicle market will dominate Japan’s EV transition,” reported Nikkei Asia in a recent article. It noted that EV giants from China and the U.S., represented by Tesla and BYD, are rapidly expanding their sales networks in Japan: Tesla plans to increase its number of stores in Japan from 23 to 50 by the end of 2026; BYD aims to establish 100 stores by 2025. In contrast, Japanese automakers are “struggling” amid the global shift toward electrification. What are the reasons behind this situation? And what is the current stance of Japanese automakers on electrification?
Foreign car brands account for three-quarters of the market
In recent years, Chinese and American automakers have been actively expanding their presence in Japan’s EV market. In March this year, Tesla confirmed that its focus in the Japanese market would be on its mainstream models, the Model 3 and Model Y. At the same time, Tesla is also planning to expand its network of superchargers in Japan. According to Nikkei Asia, Tesla’s aggressive sales push in Japan is partly due to sluggish sales in Europe and the U.S., and partly because of its strong performance in Japan. Although the company has not disclosed its domestic sales figures in Japan, it is estimated that its sales in the first half of this year increased by 70% year-on-year to around 4,600 units.
Chinese automaker BYD is also expanding its store network in Japan. According to Nikkei Asia, as of June this year, BYD had 63 stores in Japan and plans to increase that number to 100 by 2025. BYD also intends to launch electric vehicles in the second half of 2026 in Japan’s dominant “kei car” (light vehicle) segment. Data released by the Japan Automobile Importers Association on June 5 showed that 2,406 battery electric vehicles were imported into Japan in May. Among them, Chinese brand BYD hit a record monthly high with over 400 units sold, coming close to Tesla’s monthly sales.
Atsuki Tofukuji, President of BYD Japan, told that Japan, as a major manufacturing power, is currently facing societal challenges such as carbon neutrality and energy transition. Electric vehicles have become a key pathway to achieving sustainable development, and the demand for electrification is growing rapidly. BYD is accelerating its global electrification strategy. In the Japanese market, “BYD Japan” has now been established for 20 years, its electric buses have been operating in Japan for 10 years, and its passenger vehicle business is entering its fourth year.
According to U.S.-based Teslarati, imported brands such as Tesla and BYD now account for approximately 75% of total electric vehicle sales in Japan. Nikkei Asia also reported that the next generation of EVs from Japanese automakers Toyota, Honda, and Nissan is not expected to hit the market until around 2026.
While Chinese and American EV brands continue to expand in Japan, Japanese automakers remain slow in their electrification efforts. Japanese media commented that the wave of vehicle electrification will eventually sweep through Japan as well. If Japanese carmakers continue to fall behind, more market share will be taken by Chinese and American companies.
Japan’s delayed response to electrification has also impacted its performance in overseas markets. Recently, Mitsubishi Motors, a Japanese brand with decades of presence in China, exited the Chinese market. The company said it had reassessed the regional environment in light of China’s rapid shift toward electrification and was forced to adjust its strategy, ultimately deciding to terminate its joint venture. Before Mitsubishi, Suzuki—another Japanese automaker—had also withdrawn from China.
Why Is It So Hard for the “Elephant” to Turn Around?
Electric vehicles are still a rare sight on Japanese streets, and charging stations are even harder to find. Overall, Japan’s domestic market is still dominated by traditional gasoline-powered cars.
For decades, the automotive industry has been one of the core pillars of Japan’s economy, with Japanese automakers consistently ranking among the global leaders in sales. According to a recently released “Top 10 Global Car Brand Sales in H1 2025” ranking by Chinese auto platform Yiche, Japan’s Toyota topped the list with 4.244 million units sold. It was followed by Germany’s Volkswagen and America’s Ford, with South Korea’s Hyundai and Japan’s Honda taking fourth and fifth place, respectively.
Despite their continued dominance in sales, Japanese automakers have been noticeably slow in adopting electrification. What factors contribute to this unusual trend? Japanese media point to a mix of industrial conditions and market-specific factors.
An article from the think tank Anbound Consulting suggests that one major obstacle to EV adoption in Japan is the country’s energy structure. From a cost perspective, Japan’s entrenched culture of small cars already keeps fuel consumption very low—under 40 RMB (roughly $5.50) per 100 kilometers. Meanwhile, Japan’s heavy reliance on thermal power generation makes domestic electricity prices relatively high. When comparing fuel and electricity costs, EVs don’t offer a significant economic advantage in Japan, especially in the high-priced EV segment. In April this year, Toyota chairman Akio Toyoda openly stated in an interview that Japan’s dependency on fossil-fueled electricity undermines the low-carbon appeal of EVs—both in manufacturing and in daily use.
Another key issue is energy security. Japan is a resource-poor country heavily reliant on energy imports. A full-scale shift to electric vehicles would dramatically increase dependence on critical battery minerals such as lithium, cobalt, and nickel—further exposing the country to global supply chain risks.
At the same time, Japan’s century-old internal combustion engine (ICE) industry has developed a massive, intricate supply chain. Ironically, this once-powerful advantage has now become a heavy burden in the EV transition. Multiple analyses point out that Japan has over 100 years of deep expertise in ICE technology. Across the country, automakers and related factories have formed industrial clusters that integrate R&D, manufacturing, sales, finance, and logistics. A major pivot to EVs would disrupt this entire ecosystem, risking mass layoffs, bankruptcies among parts suppliers, and significant blows to employment and economic stability in Japan.
Akio Toyoda has repeatedly warned that an aggressive push toward electrification could result in the loss of 5.5 million jobs in the auto industry by 2030—a blow that Japanese society would find difficult to bear.
Consumer preferences have also played a role in the slow adoption of electric vehicles in Japan. According to research by U.S.-based consulting firm IBM, only about 14% of Japanese consumers in 2024 expressed a willingness to buy an electric vehicle. In addition, some Japanese people have a low tolerance for new technologies—especially those that may disrupt their lifestyles—and tend to stick with hybrid vehicles they’re familiar with. It’s also worth noting that certain Japanese media outlets often emphasize the risks associated with EV batteries in a one-sided manner. This type of reporting has, to some extent, amplified public skepticism toward EV technology.
The Japanese website Future Image, which focuses on 5G and technology-related topics, has also analyzed the barriers to EV adoption in Japan. These include a lack of charging infrastructure, EVs being more expensive than gasoline cars, limited driving range, long charging times, and the lack of standardized charging systems. “Charging infrastructure is the key to EV adoption, but Japan’s current plans are still far from adequate,” the site noted.
Hardware and software improvements are ongoing
According to Nikkei Asia, Japan’s EV sales remain sluggish. From January to June this year, sales totaled about 27,000 units—a 7% drop compared to the same period last year—marking the second consecutive year of decline.
In response to this ongoing sales challenge, Japanese automakers are leaning more toward hybrid vehicles rather than fully electric ones. Akio Toyoda has stated that in order to ensure a smooth transition, Japanese carmakers prefer to build on hybrid technology and gradually move toward electrification without completely abandoning internal combustion engines.
Veteran automotive analysts point out that Japanese carmakers have long held a global lead in fuel-saving engine technology during the gasoline car era, and they remain at the forefront of hybrid systems. As a result, Japan has led the world in automotive energy efficiency for years, and its industry remains conservative in evaluating the environmental and energy-saving benefits of fully electric vehicles. Even though Japanese battery technology was among the world’s best over a decade ago, Japanese automakers have been reluctant to make significant investments in full EV development.
Japanese carmakers are highly globalized and tend to assess profitability across international markets when deciding on product investments. For instance, Nissan invested heavily in developing the fully electric Leaf sedan for the U.S. market early on, but the economic returns were underwhelming. Similarly, Toyota poured significant resources into its hydrogen fuel cell vehicle, the Mirai, which received a lukewarm response both in Japan and abroad. As a result, their enthusiasm for further EV investments diminished.
“Although EVs still make up a single-digit percentage of new car sales in Japan, the overall environment—both hardware and software—is steadily improving thanks to multiple favorable factors such as government carbon neutrality policies, purchase subsidies, improved charging infrastructure, and growing public awareness of environmental issues,” said Atsuki Tofukuji . He added that BYD is accelerating the introduction of plug-in hybrid (PHEV) models and fully electric kei cars to meet Japan’s increasingly diverse mobility needs.
Facing fierce competition from Chinese and American EV makers and Japan’s own slow electrification process, traditional giants like Nissan and Honda are undergoing difficult strategic shifts. In May this year, Honda announced it would cut its planned electrification investment from 10 trillion yen to 7 trillion yen, placing greater emphasis on hybrid models. From 2027 to 2031, Honda plans to launch 13 new hybrid models globally and aims to sell 2.2 million hybrid vehicles by 2030—including a large SUV specifically designed for the North American market.
Some Japanese automakers are also partnering with Chinese EV-related companies. Nissan plans to begin exporting electric vehicles from China starting in 2026, targeting markets such as Southeast Asia, the Middle East, and Latin America. This move aims to counter weak performance by offering competitively priced, high-performance Chinese-made EVs to the global market. In a related development, Nikkei Asia reported on August 2 that Toyota is increasing its procurement of Chinese parts at its largest Southeast Asian production base in Thailand, in order to boost the competitiveness of a new EV model set to launch in 2028.
I wasn’t expecting to learn so much from this post!