Japan Chasing Trends in Automotive

With a significant domestic and international presence, the Japanese automotive industry is integral to the Japanese economy.It is interesting to observe how Japanese automakers have quietly but resolutely started working on "Super Clever Plan" to develop electric vehicles, along with other measures.

In a global context, it is an encouraging indicator to see that Japan’s automotive industry is still relatively prosperous compared to other countries, as it is still the fourth-largest automotive market worldwide. Over the years, Japan’s automotive sector has also performed well internationally but has faced difficulties due to shortages of semiconductor chips, an essential part of the automotive production process. We cannot ignore China, as they have already announced a policy of making half of all new vehicles sold in 2035 either EVs, FCVs or PHEVs. The Chinese government also seems to be planning for the remaining half to be hybrid electric vehicles (HEVs).

The surprisingly there is another country which is proving to be the speeding horse, that is India. Japan has officially lost its position as the world’s third-largest automotive market, with India surpassing it in terms of automotive sales in 2022; preliminary data estimates that India totalled 4.25 million units, while Japan managed a close 4.2 million which is marginally less than India.Having said that a million dollar question may arise as what is the outlook for the automotive industry in Japan?

Despite the supply chain challenges like the chip shortage, the automotive industry remains one of Japan's most prominent domestic industries. The country is home to several well-known automotive manufacturers with renowned reputations for producing high-quality, reliable vehicles, such as Toyota, Honda, and Nissan.

While regaining its status as the fourth -largest automotive market would still hold some degree of importance, the Japanese automotive market should also focus on diversifying its efforts, as doing so may attract more attention from domestic and foreign investors. Eventually, the increased interest will naturally translate to a larger sales volume, which will help Japan reclaim its previous position in the global rankings.

Amid these trend, Japan has also announced a policy that would result in all new fleets of products being composed of electric vehicles in 2035, but its plans for the breakdown of EV sales are still unclear. Japan, the first country in the world to commercialise mass-produced HEVs, was supposed to be a "leading nation in electrification," with HEVs projected to account for more than 40% of registered vehicles in the country. However, Japan now seems to be behind the curve in this area. We must appreciate Honda Motors that appears to be the only exception, standing out among Japanese automakers with its bold policy plan to sell only EVs and FCVs as new vehicles globally by 2040.

New market entrants and current stakeholders of the Japanese automotive industry can catalyse market growth by exploring several automotive trends, like electric vehicles (EVs) and automobile production revitalisation, as they will likely generate the most investment interest. Given that the nation’s transition toward endemicity is attracting more business across several industries, automotive companies should capitalise and actively seek partnerships or collaborations with potential investors.

On the other side the worries of policy makers on delay in adoption of Digital Transformation in Japan by many leading manufacturing houses despite prolonged efforts by them is slowing down and impacting production system and Global exports. Due to such delay and if we take a closer look at the strategies of Japanese automakers, however, it becomes clear that they are, in fact, making astute moves as they prepare to compete for survival. The leading company in this regard is probably Toyota Motor, which announced its strategy for in-vehicle batteries in September 2021.

Regardless of how automotive players in Japan will mobilise industry growth, it will be essential to ensure that public-private sector collaboration takes place. Parties from both sides will need to make collective decisions that guide and foster holistic growth. This can be achieved through several methods, such as government policies on strengthening Global exports, early adoption of Digital Transformation, Automation, Electrification or heavy tax exemptions for automotive production or even partnerships between government offices and automakers to improve automotive infrastructure in the country. Such collaboration will further ensure the success of Japan’s automotive industry by 2030.

In last its not that Japanese Auto Industry and manufacturers are no keen in taking steps forward, but they have taken many innovative steps and they also feels that a promising future awaits it. Rather than corporate policy, it is the policy of the Japanese government that is noticeably lagging behind and sighting the laggardness, the federal government of Japan and putting up heir best effort to push forward their policies. Very important to note that the introduction of renewable energy, which will determine whether Japanese automakers can continue producing their vehicles domestically, the government has set the goal of a 46% reduction in greenhouse gas emissions by 2030, which looks to be a daunting task to achieve by the Industries. On the contrary, there is, however, no clear pathway for reaching this destination set by the government. If steps are not taken at high speed than it may defeat the purposes of Japanese automakers if the country fails in the competition for survival.