Japanese manufacturers have intensified their efforts to make the switch to EVs, putting a particular emphasis on supply networks.
In recent weeks, major new investments and alliances aimed at strengthening their supply chains for electric vehicles (EVs) have been made by leading Japanese automakers as part of their increased efforts to make the switch to zero-emission vehicles (ZEVs). This is mostly a response to the rapidly expanding demand for EVs outside of their native market, which is still quite small.
The Japanese auto industry has come under fire for being slow to adopt ZEVs, despite the fact that companies like Toyota and Nissan, which pioneered the global acceptance of hybrid vehicles some 20 to 30 years ago, are still hesitant to make the changeover. The most developed economies in the world have set quite aggressive timelines for the phase-out of internal combustion engines.
The Japanese government announced the 2035 Clean Energy Vehicle Standard (CEVS) goal last year, which includes ZEVs such plug-in hybrids and electric and fuel-cell vehicles as well as all new passenger cars. ZEV sales are expected to have been less than 20,000 units last year, or 0.4% of all vehicle sales, despite government incentives of up to JPY800,000 (US$5,600) per vehicle. About 8,600 of them were imported, much of them from China. However, hybrid cars, which made up about 1.46 million units last year, or about one third of all sales, are not eligible for government incentives.
At a G7 summit earlier this year, Toyota, the nation’s top hybrid vehicle manufacturer, urged the government to “make clear it backed hybrid vehicles as much as zero-emission battery vehicles.” In a report published last month by Greenpeace, ZEV manufacturing—which made up just 0.2% of the top ten global car manufacturers’ total output in 2017—placed Toyota at the bottom of the list. Honda and Nissan fell three spots, with ZEVs making up just 0.35 and 2.2% of the world’s vehicle production, respectively, as opposed to 8.2% for GM.
In 2022, almost 9% of all vehicles sold in Europe were ZEVs, and the EU has set a goal for all new vehicle sales to be ZEVs by 2035. In China, EV sales last year made up 11% of all vehicle sales, and they are expected to reach 18% in 2022, or about five million units, in addition to an extra million hybrid sales. According to the most recent information gathered by South Korean consulting company SNR Research, the nation is home to the two largest battery producers in the world, CATL and BYD.
Government measures that have made China the world’s largest market for EVs have encouraged Chinese automakers to invest extensively in the transition to zero emissions. With over 487,000 sales in the first eight months of 2022 and comparable numbers of plug-in hybrids, BYD is also the nation’s top EV manufacturer. Tesla comes in second with about 400,000 deliveries from its Shanghai facility. To bring new EVs to market in the next two years, all major auto manufacturing companies, including SAIC Motor and GAC Group, are making significant investments.
With over 936,000 deliveries last year and an anticipated 760,000 units in the first eight months of 2022, Tesla continues to be by far the largest worldwide EV producer.
608,000 electric and hybrid car sales were made in the USA in 2021, with 73% of those being battery-powered, or 3% of all light vehicle sales. In the first half of 2022, this increased to 5.5%, with hybrid electric vehicles accounting for an additional 1.4%. Without the recent supply chain snags, this year’s penetration of ZEV would have probably been considerably greater.
In response to the surge in international EV demand, Japanese automakers including Toyota, Honda, and Nissan recently announced significant investments to enhance their global EV supply chains.
Honda and LG Energy Solution formed a new strategic alliance at the end of August with the goal of constructing a US$4.4 billion jointly owned lithium-ion battery factory in the USA with a 40GWh annual production capacity by 2025. This is a component of a larger US$40 billion global electrification investment strategy by 2030, when the business anticipates selling over two million EVs annually worldwide.
In the same week, Toyota said that it would spend JPY730 billion (US$5.1 billion) on brand-new EV battery manufacturing facilities in both Japan and the USA, boosting their total capacity by 40 GWh by 2026 to fulfil the growing demand for EVs around the world.
Additionally, Nissan has agreed to buy a controlling ownership in Vehicle Energy Japan Inc. (VEJ), an affiliated business engaged in the design and production of automotive lithium-ion batteries, as well as battery management and related production systems. According to Nissan, the acquisition will provide them access to a reliable battery source and help create the next generation of batteries with a competitive edge in terms of both performance and price.
Major Japanese automakers are likewise working harder to catch up to other international automakers in terms of EV production.