TOKYO – Just over a decade ago, Nissan was the first automaker to offer a production car that ran on batteries only. The hatchback, the Leaf, was a huge success, at least for electric cars. More than 500,000 copies had been sold by the end of last year.
But as the road that Nissan has taken becomes ever denser, Japan’s powerful auto industry is at risk of being left behind. As governments and automakers around the world make bold pledges to transition to all-electric vehicles, Japanese automakers and regulators are hedging their bets.
Japan dominates the global market for the current generation of climate-friendly vehicles – gasoline-electric hybrids – and hopes to capitalize on its huge investment in technology for as long as possible. However, with this short-term focus, there is a risk that the country’s most important industry will miss a transformative moment, said Masato Inoue, the lead designer of the original sheet.
“When it comes to disruptions, there is always fear,” said Inoue, who retired from Nissan in 2014. But, ready or not, he added, “a big wave of electric vehicles is really coming.”
Right now it’s just a wave. Electric cars account for less than 3 percent of global sales. Many buyers shy away from higher costs, limited range and long loading times. With the exception of a few luxury models, it is not easy to make a profit from the cars.
Still, the race for an all-electric future, long spearheaded by Tesla, has accelerated and broadened this year. In January, General Motors became the first major automaker to declare that it would eliminate all tailpipe emissions from its cars by 2035. Last week, Volvo promised to outperform its bigger competitors by promising to be all electric by 2030.
Alongside traditional automakers, startups like the Chinese company Nio and titans from other industries like Apple are looking for parts of the burgeoning market.
Automakers in the US, China, Europe and South Korea are already sprinting past their Japanese competitors. Toyota didn’t bring its first battery electric vehicle to the consumer market until early 2020, and then only in China. Honda relies on GM to manufacture electric vehicles for the US market.
Last year, Japanese automobiles made up less than 5 percent of battery electric vehicles sold worldwide, according to EV-volumes.com, a company that analyzes the electric car market. That proportion was largely due to the Leaf’s continued popularity: the automobile accounted for nearly 65 percent of all Japanese battery electric vehicles sold.
The electric vehicle rush has been fueled in part by plans in China, European countries and elsewhere to either require higher sales of electric cars or ban gasoline-burning vehicles in the coming years. Scientists say the transition from gas-powered vehicles is critical to tackling climate change and reducing smog.
Those moves have created a huge potential market for all-electric vehicles that investors clearly see as the cars of tomorrow: Tesla is more valuable than the next six automakers combined, despite only having a tiny fraction of their sales.
In Japan, however, automakers and the government are questioning some of the basic assumptions that power the electric train. They are skeptical – at least in the short to medium term – of the potential profitability and environmental superiority of electric cars.
In December, Japan announced that it would stop selling new gas-only cars by 2035. However, the government continues to view hybrids as an important technology and does not intend to follow the lead of places like the UK and California who plan to ban them. A Commerce Department official said in a recent interview. Japanese regulators announce that they will release details this year.
The opposition to the elimination of hybrids has found its strongest voice in Akio Toyoda, chairman of the Japan Automobile Manufacturers Association and president of Toyota, the world leader in hybrid car sales.
The company sets the tone for the entire Japanese auto industry. The company owns Daihatsu and in recent years has partnered with three smaller automakers – Subaru, Suzuki and Mazda – a group that makes more than half of all Japanese cars to develop electric vehicles, including hybrids. It has also heavily promoted cars that run on clean-burning hydrogen, a technology that has not yet caught on in Japan or elsewhere.
During a press conference in December in his capacity as head of the automobile association, Toyoda derided the idea of replacing Japan’s hybrids with all-electric vehicles and accused the Japanese media of increasing their economic and environmental viability.
Electric cars, Toyoda emphasized, are only as clean as the electricity that drives them and the factories in which they are built. Japan, Toyota’s second largest market, plans to become carbon neutral by 2050. However, as long as it continues to rely on fossil fuels to generate electricity, the environmental benefits of vehicles will remain a mirage.
Japanese automakers are “hanging on their fingernails,” he added, and if Japan mandates a move to all-electric vehicles, which have fewer components and are easier to manufacture, it could cost millions of jobs and destroy an entire ecosystem of auto parts suppliers.
According to a report from market research company IDTechEx, sales of gasoline-electric hybrids are expected to continue to grow through 2027. It is understandable, therefore, that Japanese companies – and regulators – want to try to recoup the country’s huge investments in hybrid technology and wait to see how consumer preferences and foreign regulatory systems develop, said James Edmondson, an analyst for the company.
“For manufacturers like Toyota and Nissan, the hybrids are so productive that there is a good business model for them. It is therefore in the government’s interest to keep pushing for them,” he said.
Kota Yuzawa, an auto industry analyst at Goldman Sachs, said it wasn’t about whether Japan’s automakers could make the transition. They have world-class technology and invest significant resources in developing more of it. “But they’re waiting for the timing to be right,” he said.
“The biggest questions are: Can you make a mass market vehicle? Can you break even? ” he added.
The answer is yes, said Mr Inoue, the leaf designer who now splits his time between running a consulting firm and teaching sustainable mobility design at IAAD, a design institute in Italy.
The transition from building hybrids to building all-electric vehicles is not easy, however. The two types of cars cannot be inexpensively manufactured on the same platforms, Inoue said. “If a lot of companies don’t change now, the efficient production of electric vehicles will be quite difficult in the future.”
With a history of mass producing electric vehicles, Nissan is arguably the best positioned Japanese automaker to compete in the zero-emission car market. But the company says it has lost its lead and is now trying to catch up.
Last summer it announced its most ambitious battery-electric vehicle since the Leaf, an SUV called the Ariya. And in January, the company said it would be carbon neutral by 2050, a decision that reflected a new change in national policy late last year.
But like the other Japanese automakers, it is moving cautiously.
“For Nissan’s key markets, every brand new vehicle offering will be electrified in the early 2030s,” the company’s chief sustainability officer Joji Tagawa said in an email. “In other markets, however, we will gradually switch to electrified vehicles.”
In the meantime, the company will be heavily promoting its newer hybrid technology it calls e-Power: essentially an electric motor powered by a gas generator.
In Japan, the government’s lack of enthusiasm for zero-emission cars is likely to put automakers at a serious disadvantage, said Kazuo Yajima, a former chief engineer at Leaf who now runs Blue Sky Technology, a company that develops micro-electric vehicles.
China and the European Union have lost the hybrid technology race, Yajima said. Hence, their governments have made a strategic decision to invest in the development of electric cars, including key technologies such as batteries.
Japanese automakers’ reluctance to take the plunge to all-electric vehicles could lead them to suffer the same fate as the country’s consumer electronics companies, which have largely become irrelevant for not staying ahead of market trends, according to Yajima.
Mr. Inoue agrees. The automotive sector is “the final battlefield” for Japanese industry, he said.
“Now Japan is winning,” he said, “but I think if we lose the opportunity to switch to electric vehicles in 10 years, we may lose.”