24 Jul Could Japan’s stance on the future of EVs leave it behind in the race towards carbon neutral?
Around 10 years ago, Japan’s Nissan Motors became the first car maker in the world to produce a vehicle that can run solely on batteries. The Nissan Leaf has been extremely successful – at least by the standards of electric vehicle (EV) sales.
By the end of 2020, half a million Nissan Leaf cars were sold and Japan cemented its place as a battery powered electric vehicle (BEV) pioneer. Since then, however, there has been a marked slowdown by Japan’s EV makers.
All around the world, countries are making big promises about transitioning to EV cars, while in Japan both manufacturers and regulators are more cautious. Japan does, however, dominate the global market for this generation of greener vehicles – gas/electric hybrids. And naturally, Japan wants to capitalise on this technology for as long as possible.
Japan views the future of EVs differently than other countries – for now
It’s feared that Japan’s view of EV is a rather short-term way of looking at the industry, however. And according to the original designer of Nissan’s Leaf, Japan could be missing a trick. Mr Inoue no longer works at Nissan, but he said in a recent interview with the New York Times: “When disruption happens, there’s always fear but either way a big wave of electric vehicles is really coming.”
Right now, EVs don’t even account for 3% of global car sales. Buyers are cautious about spending more on EVs and are wary about how long they take to charge and how far they can drive on one charge. And for manufacturers, making the profit they want isn’t always easy with electric cars.
Regardless, the race for global domination in EVs is forging ahead. Led, of course, by Tesla, the industry is expanding rapidly. In January 2021, General Motors publicly pledged to eliminate all emissions from its cars by 2035. More recently, Volvo jumped in and declared it would do the same by 2030.
Auto manufacturers in South Korea, Europe, China and the US are ahead of those in Japan. For example, Toyota took until last year to release its first BEV and even then, it was only available in China.
Japanese Government unsure over profitability of EVs
According to EV-volumes.com, BEVs made in Japan accounted for just under 5% of BEVs sold globally. Most of this is down to Nissan’s Leaf proving popular even after 10 years.
In Japan, both the Government and auto manufacturers are still unsure of the profitability of EVs – at least in the short term. In December 2020, Japan did announce it would cease to sell brand new gas cars by 2035. However, the Government insists that hybrids are vitally important, and they do not intend to ban them in the same way that places like the UK and California have said they will.
This is backed by the Japan Automobile Manufacturers Association (JAMA), which leads the country’s industry. Owner of Daihatsu, the company has recently partnered with a number of smaller firms to develop hybrid EVs (Suzuki, Mazda and Subaru). The JAMA points out that only if the electricity that powers the vehicles is clean will EVs make a difference. Right now, Japan uses fossil fuels to make electricity and until that stops, switching 100% to EVs will make no real, tangible difference.
Japan expects sales of hybrids to continue to increase until 2027, according to market research firm IDTechEx. And the industry wants to recoup the massive investment that has gone into this sector before switching to EVs.
Timing must be right for Japan to switch from hybrids to full EVs
Making the total shift from manufacturing hybrids to 100% EVs is partly about timing. It’s not possible to manufacture both in a cost-effective way, and I think that the opportunity to switch must be taken soon. Nissan is well placed to begin this transformation, thanks to its history of mass producing the Leaf.
And while Nissan acknowledges that it has lost its leading edge in this sector, it intends to get that back. In the summer of 2020, Nissan annoucned a new BEV with its new SUV called the Ariya. This was followed in January 2021 by an announcement that Nissan will be totally carbon neutral by 2050.
Nissan’s representative, chief sustainability office Joji Tagawa told the NYT that: “For Nissan’s key markets, every all-new vehicle offering will be electric by the early 2030s, while other markets will be slower to transition.”
It’s feared that the Government’s lack of support for totally emission-free EVs will put its own auto manufacturers on the back foot. The EU and China, on the other hand, lost the race to create the hybrid technology that Japan excels in. This has led Governments to invest in key components of the industry, such as batteries.
Japanese industry could lose its edge in the same way that it did with consumer electrics after the 1990s boom if it doesn’t make the full leap to EVs before long. Keeping ahead of market trends and consumer expectations must lead the way.
Nissan is expanding battery manufacturing in Japan and the UK
Key components for EVs are very much part of Japan’s short- and medium-term plan, however. There is an urgent demand for batteries for EVs, and for alternative battery development to speed up decarbonisation.
Earlier this year, Japan’s Battery Association for Supply Chain (BASC) launched. The body was formed to reinforce and grow the industry’s competitiveness at a global level and is lobbying for more Government support.
The BASC comprises 55 members including:
- Nissan Motor Co Ltd.
- Sumitomo Metal Mining Co Ltd.
- Panasonic Corp.
- Toyotsu Lithium Corp.
- Ashahi Kasei Corp.
Carmakers all around the world are scrambling to increase and improve battery supply chains. In 2020, Toyota Motor linked up with CATL and Panasonic, while Volkswagen plans six new battery plants in Europe over the next 10 years. And in Japan, Nissan Motor has recently announced a partnership with a battery maker in China. Nissan Motor is investing more than $1.8 billion (200 billion yen) that will go towards new EV battery plants in the UK and in Japan.
Nissan intends to be making batteries at both new plants by 2024 and the aim is to produce enough batteries to power 700,000 EVs every year. The shift towards EVs is leading to more and more competition to invest in major components, such as batteries. And these new plants will be operated by Envisions AESC Group, which is 20% owned by Nissan.
Global electric car stock reached ten million last year, following ten years of growth. And the ten million mark in 2020 was a 43% increase over the year before, showing clear proof that the market is speeding up exponentially. Japan must consider its next move in this market carefully to ensure it’s not left behind.