China’s EV revolution shows grim future for Japan’s car titans
In the world of gasoline cars, Japan’s automakers are king. Toyota has held the title of the world’s No. 1 car company for the past three years, while Honda and Nissan remain global bestsellers.
But as the transition to electric vehicles accelerates, the Japanese giants are facing stiffer competition from EV upstarts like Tesla and BYD. Nowhere is the threat more apparent than in China — the world’s largest auto market and where 1 in 4 cars sold last year were electric. EV sales are forecast to climb to 9 million in 2023 (yes, 9M vehicles), reaching market penetration of 35%.
Honda and Nissan sales in China have been falling for at least two years, while Toyota’s sales last year declined for the first time in a decade. Although chip shortages, COVID-19 lockdowns and the related supply chain snarls played their part, a growing issue is the lack of attractive electric-car offerings from the trio.
China is providing a window into a future where these Japanese titans — which did more to bring cars to the masses than any other automakers — fall from their pedestal, potentially upending the global auto-making landscape for good. Tesla is the world’s top EV-maker by vehicles sold, followed by companies including China’s BYD and Volkswagen, according to Bloomberg Intelligence. No Japanese carmaker makes the top 20, leaving them on the sidelines of the auto industry’s fastest-growing sector.
"If the Japanese automakers continue a conservative and indecisive approach to their EV strategies, it’s only a matter of time before they fail in the global market,” said Yale Zhang, managing director of Shanghai-based consultancy Automotive Foresight.
In China, Japanese cars are mostly produced and sold through joint ventures with local partners. Guangzhou Automobile Group has partnerships with Toyota and Honda, while state-backed Dongfeng Motor Group has ventures with Honda and Nissan.
The ventures have long excelled with good value, reliable gasoline vehicles in the midrange category — cars priced between 100,000 yuan to 300,000 yuan ($14,000 to 43,000). Nissan’s compact Sylphy sedan, the Toyota Corolla and Honda’s Civic are known in China as the "three musketeers” of popular Japanese cars. Sylphy was the second-best selling model in China last year, with deliveries of 393,500 units. Coralla was No. 10 at 191,610.
But starting in 2020, when Tesla’s entry supercharged China’s EV market, the Japanese trio started to be squeezed at both ends of the market. Tesla and local EV companies like Nio and Xpeng began to make inroads at the top end, while budget cars like the Hongguang Mini EV from General Motors and its Chinese partners became popular with first-time buyers, and was the top-selling model in 2022.
(20min delay)