LMC Automotive’s (a GlobalData company) Asia-Pacific Analytics Team assesses the outlook for BEVs in Japan

In H1 2022, BEV sales in Japan more than doubled to 17,780 units. Although this volume only accounts for 1 % of all passenger car sales, we can safely say that the Japanese market has finally started accepting BEVs.

Until recently, and despite the global momentum of BEVs, they have not been well received by Japanese consumers. Strong concern for environmental issues is no doubt as important to Japanese consumers as to car buyers elsewhere. However, Japanese people have not felt the urge to transfer immediately from hybrid vehicles, which account for circa 40% of all passenger car sales, to plug-in vehicles.

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In December 2021, Toyota unexpectedly exhibited 15 BEV prototypes and announced that it will roll out 30 BEV models by 2030. The OEM also stated that Lexus will become a BEV-specific brand by 2035 globally (and by 2030 in China, Europe, and N. America). The announcement seems to have stimulated change in Japanese consumers’ minds, as the group accounts for more than 45% of all vehicle sales in Japan. Prior to the Toyota reveal, Mazda also announced the launch of a series of BEVs globally. With the BEV models by Nissan/Mitsubishi and foreign (especially European) importers, there shouldn’t be any BEV supply-side issues in the mid-to-long term.

As for the demand side, according to a sample survey that JAMA (Japan Automotive Manufacturers Association) conducts bi-annually, the share of current vehicle owners who will likely buy BEV next time has increased from 23% (2019) to 30% (2021). On the other hand, the same measure for hybrid (FHEV) to plug-in hybrid (PHEV) dropped from 69% (2019) to 62% (2021). This result means that although FHEV and PHEV will remain Japanese consumers’ first choice for several more years, BEV sales will see continuous growth. However, as consumers are generally satisfied with hybrids and there is no great urge to transfer to BEVs immediately, we assume that BEV growth in the Japanese market will be much slower than in Europe and China.

Looking at the segment profile, Premium-segment models are mainly covered (for now) by European importers who have already started launching BEV models, replacing ICE ones. In the mid-term, BEVs from Lexus will be available in most of the existing segments.

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Non-Premium segment BEVs will be primarily led by the Japanese OEMs. Nissan and Mitsubishi have already heavily invested in this sector. As mentioned above, Mazda and Toyota recently announced their BEV strategy globally. In addition, Hyundai re-entered the Japanese market with fuel cell electric vehicles (FCEVs) and BEVs in 2022. BYD in China also announced that it is going to enter the Japanese market with three BEV models, with sales starting in 2023. Although it is difficult to predict how well they will be accepted by the Japanese market, they will press ahead with this plan.

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As a variety of BEV offerings in both the Premium and non-Premium segments from global vehicle manufacturers becomes available, BEV sales in Japan will no doubt grow, but we will not see the boom of China or even the growth rate of Europe. This is one possible scenario that we can expect to play out.

However, in addition to consumers’ current satisfaction with hybrids, there are other obstacles to widespread BEV acceptance in Japan. According to the same JAMA survey mentioned above, while people are gradually accepting BEVs, the negative image of BEVs remains at a constant level. The following are outstanding adverse perceptions of BEVs:

  • High vehicle prices.
  • Anxiety about the durability of the battery.
  • Short-range anxiety.
  • Limited charging facilities available.
  • Time for battery charging.

These are of course the classic perceived BEV drawbacks but while they have to some degree faded in other markets, Japanese consumers’ attitude to them has not improved one bit judging by results from the same survey in 2017 and 2019. Thus, it could also be said that BEVs will not be accepted in all segments evenly in Japan because of this lingering negativity. This is the second scenario.

As for Premium segments, importers are shifting to BEVs fast and there will be no choice other than BEVs sooner or later. Additionally, Premium vehicle owners are typically wealthy, thus sales of BEVs will increase smoothly in this segment.

On the other hand, in the non-Premium segments, the transition to BEVs may be very slow apart from one vehicle type: Kei cars (the Mini car segment). In June 2022, Nissan and Mitsubishi launched the Kei car-based BEV models, Nissan Sakura, and Mitsubishi eK X EV. Kei cars are predominantly used for daily commutes or short shopping trips within a city, and drivers do not have to worry too much about charging their battery frequently as they won’t be driving long distances. As for the “high vehicle price” image, government support for BEVs means that their actual price is less than JPY 2 mn (EUR/USD14k), which is enough to overcome the negative price image.

So, in the non-premium sector, Kei car BEVs look likely to be accepted by the Japanese market ahead of larger BEVs. These battery-electric Kei cars could then help to kickstart multi-segment BEV ownership.

Of the 17,780 units of BEV sales in H1 2022, Nissan’s Sakura and Mitsubishi’s eK X EV amounted to 1,853 and 426 units respectively, and have made a favorable debut so far. As the Kei car segment accounts for 40% of the total vehicle parc, and 37% of all vehicle sales, its transition to BEVs is a crucial issue, with other Kei car makers now mentioning their plans in this area.

Honda has plans to add a Kei car BEV in 2024. The model will reportedly be a commercial vehicle to be used mainly for delivery services. The carmaker also has a plan to add one to the passenger car category around 2030 for a smooth transition from the N-Box Kei car.

Daihatsu also announced plans to launch a Kei BEV by 2025, keeping the price below JPY 2mn (at around US$13,500).

Suzuki has disclosed that it plans to release a Kei car BEV in 2025. A little after that announcement, the OEM also said that it plans to develop a Kei BEV based on the Suzuki Every van. Thus, we assume it is likely to add a commercial version initially, to be followed by a passenger car version.

Although there is a sign that Japanese consumers have started accepting BEVs, the classical negative image of BEVs remains strong. Considering these conditions, the latter scenario we lay out above seems to be more realistic for Japan.