Japan’s traditional automakers need to raise their game in the race to develop pure, battery-driven electric vehicles (EVs) or risk being left behind by Chinese, US and European producers, analysts say.
Despite dominating auto production in Asia for decades, Japan’s big players have been slow to fully develop the battery-only technology that is eclipsing hybrids as the most likely type of vehicle to encourage drivers of gasoline-powered cars to join the automotive revolution.
Battery technology and government policies to phase out gasoline-powered vehicles are driving the change away from hybrids toward a market worth billions of dollars in potential sales.
Illustration: Yusha
Breakthroughs mean that new models such as the Hyundai Ioniq 5 have a socket on the side of the vehicle that can be used to power household appliances. The next step is a battery that acts as a domestic power storage unit and feeds power back into the grid.
Big tech companies such as Foxconn and Huawei are considering making EVs as they become as much about electronics as transport.
Tesla topped the table for worldwide sales of plug-in EVs last year, according to Statista, with more than 500,000 vehicles. Volkswagen was a distant second, followed by the Chinese market leader BYD.
No Japanese manufacturers made the top 10. Last year, fewer than 15,000 battery EVs (BEVs) were sold in Japan, or less than 1 percent of overall vehicle sales. Toyota-owned Daihatsu, which has the fourth-largest share of the market by domestic sales, does not make any compact EVs.
GERMANY LEADS
Sales of BEVs in Germany last year, where Volkswagen is leading the charge, reached 6.9 percent, while Britain was close behind at 6.6 percent. In China, where 25 million vehicles are sold every year, BEVs accounted for 5 percent of the market. That percentage will only grow as these countries phase out gasoline-powered vehicles and hybrids.
Although Japan says it wants to phase out gasoline and diesel-powered vehicles by the mid-2030s and is a powerhouse producer of hybrid vehicles, consumers have a limited choice when it comes to BEVs.
The government also faces pushback from the boss of Toyota who last year said that “the current business model of the auto industry is going to collapse” if the government moved too quickly.
Toyota has no plans to mass produce a BEV until 2025, although it is developing fuel-cell EVs (FCEVs) that run on hydrogen.
Bakar Sadik Agwan, senior automotive consulting analyst at GlobalData, a leading research and consulting company based in India, said that Japanese manufacturers in particular need to raise their game.
Tesla has reduced the cost of the Model 3 in Japan in a direct challenge to local producers such as Toyota, Honda and Mazda, which are also facing competition from Chinese vehicles and South Korea’s Hyundai, he said.
“Several global manufacturers do not have a strong BEV portfolio,” he said. “Although the global manufacturers have not aggressively launched BEVs, most of them are investing in research and development, as well as strategic alliances. Unless governments discourage the purchase of conventional vehicles, the demand for such vehicles will continue to be strong in the medium term.”
Shanghai-based CMR analyst Shaun Rein went further, saying that manufacturers such as Toyota face an existential threat from their Chinese and South Korean competitors if they do not develop pure electric technology.
“Toyota and some of these other companies could go out of business if they don’t wake up,” he said, adding that producers such as Ford and Volvo — owned by China’s Geely — have commitments to only sell EVs in Europe by the end of the decade.
STATE COMPETITION
By 2050, Toyota aims to reduce vehicle carbon-dioxide emissions by 90 percent from 2010 levels, it said, adding that it is working on a range of electrified vehicles — including hybrid, plug-in hybrid, BEVs and FCEVs.
However, the competition from state-backed players is fierce. Although Tesla is still the technological leader worldwide, especially on batteries, China wants to become stronger in this key market through companies such as Contemporary Amperex Technology and BYD.
China is also highly motivated to convert drivers to BEVs because it needs to reduce pollution in its megacities, Rein said.
To achieve this goal, Beijing plans to increase the EV share of new vehicle sales to 20 percent by 2025 and to at least 50 percent by 2035.
To persuade consumers to go fully electric, cities such as Shanghai are mandating charging points in all residential developments and shopping malls.
This month, the city’s authorities made it free to obtain special license plates for BEVs and would withdraw free plates for hybrids in 2023 to ensure more people to buy zero-emission vehicles.
Shanghai makes it expensive and time-consuming to obtain a license for an internal combustion engine vehicle.
Other countries in the Asian-Pacific region are using government policy to aggressively drive the uptake of all types of EVs, although Australia remains an outlier, as some of the nation’s states plan to increase taxes on EVs.
In South Korea, the government is collaborating with manufacturers to bring down the high cost of EVs, a factor still seen as the biggest disincentive to buyers. The aim is to produce vehicles with a greater driving range, thus overcoming the other major downside for would-be owners: the fear of running out of power on longer journeys.
Hyundai’s one-size-fits-all platform, which enables it to design all its EVs around the same basic structure, is seen as the template.
Thailand, which is projected to make 2 million vehicles this year and is the 11th-largest vehicle-producing country in the world, has pledged that 30 percent of its output by 2030 is to be EVs.
Singapore this month said that it would not allow the registration of diesel-powered vehicles after 2025, which would mainly affect the city-state’s taxi fleet.
It aims to eliminate internal combustion engines by 2040.
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