BYD, whose sales performance has shaken the global EV market this year, is about to be officially available at showrooms in Japan at the beginning of next month. The company already presented its new car model in Japan this July. After half a year of preparation, can BYD succeed in the Japanese market, which even Tesla finds hard to prize open?
The Japanese passenger car market reported a scale of 3.67 million units in 2021, the rock bottom in 10 years, of which "K-Class" cars, unique to the Japanese market, accounted for 1.28 million units. In other words, the market left for foreign brands to compete for only had a size of about 2.4 million units. Moreover, the force of Japanese automakers, led by Toyota, claimed a market share of over 90%, leaving the best-selling foreign brand, Mercedes-Benz, with an annual sales volume of only 50,000 units (Toyota took more than 1.4 million units). In the world's third largest single car market (after China and the U.S.), the unique car culture means that foreign brands have very little room to survive. Now that the EV era has come, however, Japanese automakers have been reacting relatively slow in electrification. Only 45,000 units of new energy vehicles (BEVs, PHEVs, and FCVs) were sold last year, accounting for a mere 1% of the total car market (passenger cars plus commercial vehicles). If we look at the bright side, does it mean a greater opportunity for foreign automakers to set foot in the Japanese market? Let's first examine two prerequisites for the widespread adoption of EVs…
- Construction of public charging piles. In Japan, a small and densely populated country, it is very difficult to install home chargers, so the presence of EVs in everyday life depends on accelerated construction of public charging piles. There are only 30,000 charging stations in Japan now, and it is believed that a significant percentage of them are not working anymore due to underutilization. The Japanese government aims to have 150,000 charging stations built by 2030, but it is a matter of "balancing supply and demand". If consumers are not interested in new EV models, the operation of the charging stations will not be sustainable.
- Purchase incentives and subsidies. Currently, Japan offers subsidies of up to 800,000 yen for the purchase of a BEV, 300,000 yen for a PHEV, and 2.5 million yen for a FCV. These are pretty attractive for purchase, and the price of subsidized EVs will be reduced to a level similar to that of gasoline vehicles, but the remaining question is whether there is a suitable model for use.
Under the current circumstances, BYD, a company that has highly competitive technology and pricing and has shown impressive sales results in China, is doing some thinking. Can BYD preempt rivals and sway Japanese consumers into buying Chinese EVs by breaking their psychological defense mechanisms before Japanese automakers have a chance to develop new EVs? I think this challenge is probably much greater than the challenge of European and U.S. EVs. First, the Japanese market has never seen a Chinese branded car before, and Japanese consumers are unlikely to recognize made-in-China cars. Second, can BYD's manufacturing quality meet the Japanese standards for cars? Third, BYD vehicles must rival or even surpass European and U.S. EV models in satisfaction with the experience of new EV technology. If the second and third points, which are objective requirements, can be out of the way, we will have to wait and see about the first point, which is subjective opinion. Judging from the Chinese car market over the past two years, Chinese consumers are starting to accept Japanese cars. So, will Japanese consumers put aside nationalist sentiments as well and start to accept Chinese cars?