The dilemma between the hybrid and the Chinese offensive in Japan
Manufacturers from the Asian giant are taking the lead in electric cars in the local industry.
TokyoJapanese automaker Nissan plans to lay off around 10,000 workers, in addition to those already announced as part of its restructuring process, which will result in a reduction of approximately 20,000 employees or around 15% of its global workforce, the company announced this week. The reason is that the Japanese automotive industry is facing a situation that could redefine its future: overwhelming competition from Chinese electric vehicle manufacturers. While China accelerates production with more affordable models and leading technology, Japanese brands are torn between their historical commitment to hybrids and the need to adapt to a future increasingly dominated by total electrification. In this global struggle, Japan's success or stagnation could depend on how quickly it abandons its conservative strategy and assumes the risks of a radical transformation.
Most Japanese manufacturers maintain a strategy that prioritizes hybrid and plug-in hybrid vehicles. Hybrids account for more than 40% of domestic sales for Toyota, the world's largest brand. Critics argue that this hybrid-centric approach has slowed the full adoption of pure electric vehicles and left Japanese automakers at a disadvantage compared to their Chinese and European rivals.
Takeshi Miyao, managing director of automotive research and consulting firm Carnorama, is not optimistic about the immediate future of the Japanese auto industry. "Japanese brands are at a crossroads. While it's true that their reliance on hybrids has given them an advantage in the short term, they should now accelerate the transition to electric vehicles to avoid falling behind China and Europe."
Toyota maintains a strong focus on hydrogen fuel cells and high-performance hybrids. This product diversification reflects Toyota's strategy of approaching electrification on multiple fronts, although its adoption of pure electric vehicles has been much slower. For their part, Nissan and Honda face significant challenges in their transition to electric vehicles. Nissan, a pioneer with its Leaf model, has attempted to maintain its position in the plug-in model market, but the recent cancellation of merger plans with Honda has forced both companies to reevaluate their strategies. Honda faces the challenge of high development costs and the need to establish strategic collaborations to remain competitive.
The emergence of Chinese electric vehicle manufacturers is rapidly transforming the automotive landscape in Japan. A prominent example is BYD, which adheres to the classic formula of making good, beautiful, and cheap cars. Wang Chuanfu, BYD's CEO, wants to make its cars accessible to all citizens: "With our technology and cost efficiency, we are ready to compete in any market, including the Japanese market."
A key factor behind the success of Chinese manufacturers is their ability to optimize production costs through more efficient processes. A recent analysis of Chinese electric cars in Japan revealed that these companies have streamlined their supply chains and simplified their vehicle designs, reducing costs without sacrificing performance or technological innovations.
Rethinking strategies
This advantage held by Chinese manufacturers is forcing Japanese automakers to rethink their strategies. Former Nissan President Hiroto Saikawa believes that "the Japanese industry must adopt a bolder mindset in the transition to electric vehicles: we cannot afford to be conservative in a market that is moving so rapidly." And the Japanese government has stepped up its efforts to accelerate the transition to electrified vehicles. However, sales of pure electric vehicles in Japan are still very modest compared to those of hybrids, and ridiculously small compared to China. In fact, in 2024, Japan experienced a 33% decline in electric vehicle registrations compared to the previous year, down to less than 2% of total vehicle sales in the country.
Former Toyota President and current Chairman of the Japan Automobile Manufacturers Association (JAMA), Akio Toyoda, says: "Electrification is not the only solution to reducing emissions. Hybrids and hydrogen vehicles also have a crucial role to play in the transition. This gradual approach to electrification reflects both consumer preferences and the strategies of Japanese car manufacturers themselves, which continue to focus on very conservative intermediate solutions.