Japan’s automotive market: two scenarios for future BEV sales growth

In the first half of 2022, BEV sales in Japan more than doubled to 17,780 units. Although this volume represents only 1% of all passenger car sales, it is safe to say that the Japanese market has finally started to embrace BEVs.

Until recently, despite BEVs’ global momentum, they were not well received by Japanese consumers. A strong concern for environmental issues is undoubtedly as important to Japanese consumers as it is to car buyers in other countries. However, the Japanese have shown no immediate desire to switch from hybrids, which account for about 40% of all passenger car sales, to plug-in vehicles.

In December 2021, Toyota unexpectedly revealed 15 BEV prototypes and announced that it will produce 30 BEV models by 2030. The OEM also said that by 2035 Lexus will be the BEV brand worldwide (and by 2030 in China, Europe and North Africa). America). The announcement appears to have spurred a change in the minds of Japanese consumers, as the group accounts for more than 45% of all car sales in Japan. Before the launch, Toyota Mazda also announced the launch of the BEV series worldwide. With BEV models from Nissan/Mitsubishi and foreign (especially European) importers, there should be no problem with BEV supply in the medium to long term.

On the demand side, according to a biannual sample survey by JAMA (Japan Automobile Manufacturers Association), the proportion of current car owners who are likely to buy a BEV next time has increased from 23% (2019) to 30% (2021) ). ). On the other hand, the same figure for hybrids (FHEVs) and plug-in hybrids (PHEVs) dropped from 69% (2019) to 62% (2021). This result means that while FHEVs and PHEVs will remain the first choice of Japanese consumers for several years to come, BEV sales will continue to grow. However, since consumers are generally happy with hybrids and there is not much desire to switch to BEVs immediately, we expect BEV growth in the Japanese market to be much slower than in Europe and China.

Looking at the segment profile, the premium segment models are mainly represented (so far) by European importers who have already started producing BEV models that replace ICE models. In the medium term, BEVs from Lexus will be available in most existing segments.

The non-premium BEV segment will be dominated by Japanese OEMs. Nissan and Mitsubishi have already invested heavily in this sector. As mentioned above, Mazda and Toyota recently announced their BEV strategy worldwide. Additionally, in 2022, Hyundai re-entered the Japanese market with fuel cell electric vehicles (FCEVs) and BEVs. BYD in China has also announced that it is going to enter the Japanese market with three BEV models, which will go on sale in 2023. it is hard to predict how well they will be received by the Japanese market, will they continue with this plan.

As various BEV offerings emerge in both the premium and non-premium segments from global automakers, BEV sales in Japan will undoubtedly grow, but we won’t see a boom in China or even the pace of growth in Europe . This is one possible scenario that we can expect.

However, beyond the current consumer satisfaction with hybrids, there are other obstacles to the widespread acceptance of BEVs in Japan. According to the same JAMA survey mentioned above, while people are gradually accepting BEVs, the negative image of BEVs remains at an unchanged level. Below are some great misconceptions about BEVs:

1. High prices for cars.
2. Worries about battery life.
3. Close alarm.
4. Limited charging options available.
5. Time to charge the battery.

Of course, these are the classic perceived shortcomings of BEVs, but while they have somewhat disappeared in other markets, Japanese consumers’ attitudes towards them have not improved, judging by the results of the same survey in 2017 and 2019. Therefore, it can also be said that BEVs will not be accepted in all segments evenly in Japan due to this lingering negativity. This is the second scenario.

As far as the premium segments are concerned, importers are fast switching to BEVs and sooner or later they will have no other choice but BEVs. In addition, premium car owners are usually wealthy, so BEV sales in this segment will grow steadily.

On the other hand, in non-premium segments, the transition to BEVs can be very slow, except for one type of car: the Kei (Mini car segment). In June 2022, Nissan and Mitsubishi launched BEV-based Kei models, the Nissan Sakura and the Mitsubishi eK X EV. Kei cars are mostly used for daily commutes or short trips around town, and drivers don’t need to worry too much about charging the battery frequently since they won’t be driving long distances. As for the “high-priced vehicle” image, government support for BEVs means that their actual cost is less than ¥2 million (€/US$14k), which is enough to overcome the negative price image.

Therefore, in the non-premium sector, Kei BEVs are likely to be adopted by the Japanese market before larger BEVs. These Kei battery electric vehicles can then help jumpstart multi-segment BEV ownership.

Of the 17,780 BEV units sold in the first half of 2022, Nissan’s Sakura and Mitsubishi’s eK X EV accounted for 1,853 and 426 units, respectively, and have had strong debuts so far. With Kei’s car segment accounting for 40% of the total vehicle fleet and 37% of all car sales, its transition to BEVs is a crucial issue, and other Kei carmakers are now mentioning their plans in this area.

Honda plans to add the Kei BEV in 2024. This model will reportedly be a commercial vehicle that will be used primarily for delivery service. The automaker also plans to add one to the passenger car category around 2030 for a smooth transition from the N-Box Kei.

Daihatsu has also announced plans to launch the Kei BEV by 2025, keeping the price below ¥2 million (about US$13,500).

Suzuki has announced plans to launch the Kei BEV in 2025. Shortly after this announcement, the OEM also said it plans to develop a Kei BEV based on the Suzuki Every van. So we assume that the commercial version will be added first, followed by the passenger car version.

Although there are signs that Japanese consumers have begun to accept BEVs, the classic negative image of BEVs remains strong. Given these conditions, the last scenario we outlined above seems more realistic for Japan.