Nearly three decades after the launch of the first Toyota Prius in Japan, hybrid cars have become the leading choice in the country that introduced them to the world. Interestingly, sales of hybrid-powered vehicles in Japan exceeded those of combustion-engine vehicles for the first time in 2023.
According to Bloomberg, in 2022, 51% of cars sold in Japan were gasoline-powered, while 43% were equipped with hybrid engines. In 2023, hybrid sales surged to 55% of the total. Although no data are available for 2024, Nikkei recently reported that out of 2.7 million cars sold in Japan in 2023, 1.5 million were hybrids. As such, the market share of gasoline vehicles dropped significantly to 36%.
The outlook suggests that the gap in the automobile market will continue to widen over the years, with hybrids becoming the preferred choice for Japanese consumers for the remainder of the decade. Bloomberg forecasts indicate that by 2030, 67% of vehicles purchased in Japan will be hybrids, while less than 20% will be gasoline cars.
If these predictions hold true, Japan’s automobile market will be unique among the richest countries. Despite a recent cooling in demand, strategic research provider BloombergNEF says that by 2030, electric cars are expected to account for more than 30% of the European market share. Some reports are even more optimistic, predicting that sales in the U.S. could exceed 40% and 50% in Europe by that year.
In Japan, however, electric vehicles are anticipated to make up barely 10% of the market, according to Bloomberg.
An Exceptionally Unique Market
Given these figures, it’s no surprise that Japanese manufacturers such as Toyota, Honda, Nissan, and Mazda are proceeding cautiously with electric vehicles. While their markets aren’t solely dependent on local sales–especially for larger companies like Toyota and Honda–they do contribute to their overall strategies.
More importantly, Japan is a unique market where smaller vehicle models are favored. This is evident from the popularity of compact cars that offer ample practical space despite their small size. However, electric vehicles have yet to gain a foothold in this segment.
In contrast to other countries, Japan doesn’t face the same challenges related to diesel pollution. In the Asian nation, measures to address this issue were implemented in the late 1990s, resulting in a significant decrease in diesel car sales, from 20% in 1999 to just 1% in 2015.
Some experts suggest that Japanese consumers are hesitant to adopt electric vehicles for two main reasons. First, the charging infrastructure is limited, making potential buyers less inclined to switch to this more expensive technology. Second, there’s a strong sense of patriotism among Japanese car buyers. Most prefer to purchase vehicles from Japanese manufacturers. Currently, domestic electric vehicles aren’t widely available and haven’t yet achieved significant market success.
The Japanese market reflects the strategies employed by its leading manufacturers. However, a recurring question arises: Are these companies falling behind in their adoption of electric vehicles? According to The New York Times, Toyota’s executives were taken aback by the advancements made by Chinese companies during the 2023 Shanghai Auto Show.
While some reports indicate a general increase in electric vehicle sales, others note a rebound in hybrid sales. With new environmental regulations in the U.S. and Europe, hybrids may become the only viable alternative to traditional combustion engine vehicles.
If this scenario finally unfolds, Japanese companies’ strategies of favoring hybrids until the market matures could prove sound. This is especially true if, as Toyota claims, they have access to batteries in the medium term that offer significant added value to customers.
Image | Jezael Melgoza
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