Despite significant fluctuations in Battery Electric Vehicle (BEV) sales, particularly in the Chinese and European markets, Japan’s BEV market has been stable without experiencing sharp increases or declines in BEV sales in recent years.
In 2023, Passenger Car BEV sales in Japan increased by 50% to 89k units, accounting for 2.2% of all Passenger Vehicle (PV) sales. Although this volume is relatively small compared to the overall market size, with the share remaining around 1-2% of total PV sales, BEV sales in Japan have been gradually increasing since 2018, when they totalled 27k units and represented 0.6% of the market.
The increase in BEV sales in 2022-23 can primarily be attributed to the launch of new Kei car BEVs, specifically the Nissan Sakura and Mitsubishi eK X EV.
Nonetheless, certain factors discourage Japanese consumers from purchasing BEVs. Three key ones are high vehicle prices, concerns regarding battery durability, and range anxiety.
Kei car BEVs can mitigate these disadvantages, increasing their sales over the past two years. One typical use for Kei cars is daily commuting within the city. They are not intended for long drives, but rather for trips to work, school, and daily shopping. For these purposes, Kei car BEVs are convenient. If users charge the battery at night, there is no need to refuel at public charging stations.
However, two years after these Kei car BEVs launched, their sales have begun to stabilise. Recognising the potential of Kei car BEVs in the Japanese market, Japanese carmakers plan to introduce new models, starting with Commercial Kei BEVs. These models were initially scheduled for launch earlier this year, but their introduction has been postponed by several months due to the need for additional preparation time. Notably, Daihatsu faced challenges related to vehicle testing irregularities earlier this year, which limited their ability to allocate sufficient resources to new models, including Kei BEVs.
Over the next few years, Japanese BEV sales will likely continue their slow growth. In the meantime, hybrid models remain popular. Sales of Fuel Cell Electric Vehicles (FCEVs) are also expected to grow gradually. It will be many years before we know which vehicle type will dominate the Japanese market.
In April 2024, JAMA (the Japan Automotive Manufacturers Association) released a consumer survey concerning the PV market. JAMA conducts this survey bi-annually, the last report was released in 2022. The results confirm the BEV sales trend mentioned above.
Regarding vehicle buyers’ purchasing intentions, the survey contains a question for current vehicle owners: Which vehicle type will be considered the first choice when buying your next vehicle?
Despite, the ratio gradually declining due to the gradual shift to BEVs, 50% of respondents chose hybrid cars, indicating their continued strong popularity. Following hybrids, those who answered BEV increased slightly, from 30% in 2021 to 32% this time. Apart from hybrids and BEVs, the ratio of those who answered PHEV (11%), clean diesel (5%), and FCEV/hydrogen engine models (3%) remained the same as in the last survey.
As for fuel cell models, Toyota and Honda continue to invest in the sector, at the same time as, increasing investment in the BEV sector. Toyota has released the Mirai and Crown FCEVs to date. Honda also launched the CR-V e:FCEV in Japan in July 2024. This model is being imported from the US.
In September 2024, Toyota and BMW announced plans to strengthen their cooperation in developing next-generation fuel cell systems. As the first step of this cooperation, they plan to release BMW’s first mass-production FCEV, in 2028.
Apart from Japan, it is reported that China, where BEVs currently have a significant market share, is also investing in the hydrogen and FCEV sectors.
While Japan’s BEV market slowly increases, there is a possibility that FCEVs and hydrogen engine models could also increase their share. Thus, as far as the Japanese market is concerned, it is too soon to say which vehicle type will prevail in the future, although judging by the current trend, BEVs will increase their share eventually.
For BEV sales growth to accelerate, there are still several obstacles to overcome, as mentioned above. Additionally, media reports suggest there may be anxiety regarding potential shortages from an administrative perspective. If BEV sales increase rapidly, sourcing enough electricity to power them could become challenging.
Japan also faces a unique situation. Following the significant earthquake and subsequent nuclear power plant crisis in 2011, all nuclear power plants were suspended. Over the past 13 years, some have resumed operation, but the utilisation rate remained at only 29% in 2023 and currently fossil fuel power plants supply the majority of electricity supply. However, rising oil prices continue to negatively impact the economics of power generation at these plants.
If these negative factors are adequately addressed, BEV sales could rise rapidly.
As a final note, while it may be somewhat subjective, as consumers based in Japan, we do not feel excited about BEVs in the Japanese vehicle market, which contrasts sharply with the strong enthusiasm we experienced when the first mass-produced hybrid vehicles, such as the Honda Insight and Toyota Prius, were rapidly embraced by the Japanese market around 2009-2010.
Based on this perspective, we retain our view that BEV sales in Japan will eventually increase, but not at a rapid pace in the near term.
(GlobalData blog on October 21, 2024)
