Is This the End of Japan’s EV Ambitions?
The land that pioneered serial production of EVs, isn't buying into the idea just yet.
Welcome to another edition of Japan Business Secrets, where we decode the headlines and help you make sense of doing business with the Japanese.
This week: We take you inside the engine room of Japan’s economy — the auto industry — and uncover what’s really driving (or delaying) change.
“If you judged the global EV transition solely by what you see on Japan’s roads, you might think the revolution has been canceled.”
Nissan has just pulled the plug on its planned battery plant in Kyushu — part of a sweeping global overhaul that includes shutting down seven factories and cutting production by one million vehicles.
Honda, meanwhile, is pushing back its EV factory launch in Canada by at least two years. And Toyota has quietly delayed its own battery plant in Southwest Japan after slashing its EV sales target for 2026 by half from its original projection.
It’s no surprise that recently clients ask me:
“Is Japan giving up on EVs?”
My answer:
We are witnessing a widening gap between the winners and laggards in Japan’s auto industry. While Nissan is struggling for survival, Toyota has the cash and capabilities to accelerate at any time.
At the same time, Japan’s OEMs continue to invest billions of dollars into their battery roadmap. But they don’t push the electric vehicle – just yet. An approach that’s very different to other legacy automakers in Europe or the US.
To understand why Japan’s carmakers appear to be falling behind, we need to examine the role battery-electric vehicles play in their long-term strategies.
Let’s break it down.
Japan is a Hybrid Nation, EVs are Being Built Elsewhere
Despite headwinds in major Western markets, the world is moving toward electric mobility.
Electric car sales topped 17 million worldwide in 2024, rising by more than 25% to reach a fifth of new cars sold. The share of electric vehicles is likely to reach 40% of all new car sales by 2030, forecasts the International Energy Agency in its newly released Global EV Outlook 2025.
Contrast this to Japan.
If you judged the global EV transition solely by what you see on Japan’s roads, you might think the revolution has been canceled.
Battery-electric vehicles made up less than 1% of new car sales in Japan last year. When you add up plug-in hybrids, adoption stalls at 3.6%. That compares to about 10% in the US, 14% in Germany, 48% in China, and 89% in Norway.
In much of Japan, battery-electric vehicles (BEVs) are still a rare sight. In my town of 100,000 just outside Fukuoka, a few neighbors drive EVs — mostly aging Nissan Leafs powered in part by rooftop solar. There are two Tesla and one BYD driver in town. And the parking lots with newly installed charging stations in front of banks or convenience stores are often empty — or occupied by gasoline cars.
Out of its entire lineup of dozens of models, Toyota offers only one fully electric vehicle for sale in Japan — the bZ4X. No wonder, the world’s largest auto manufacturer that churns out 10 million cars year after year, sold just over 2,000 BEVs in Japan, a 30.5% drop from the year before.
By contrast, Toyota sold 872,000 hybrid electric vehicles (HEVs) — that’s over 400 times more, with hybrids now making up 60% of domestic sales. Honda’s ratio isn’t much better: roughly one full-electric car sold for every hybrid.
And Nissan? With just over 25,000 BEVs sold in FY2024 (ending March 2025), the company that is undergoing massive restructuring remains Japan’s EV frontrunner.
Nissan has been a pioneer in the field ever since then-CEO Carlos Ghosn unveiled the Leaf in 2009, marking Japan’s first real push into battery-electric mobility. Today, Nissan leads domestic EV sales with the Sakura, a kei-class mini-EV that consistently tops the charts. But even Nissan’s April numbers point to a sharp decline.
To put Japan’s EV sales into perspective: since 2017, Nissan, Toyota, and Honda combined have sold under 250,000 battery-electric vehicles in Japan. That’s eight years of domestic sales — roughly equivalent to what BYD sells in China in less than a single month.
The conclusion seems obvious:
Japan has fallen massively behind in the EV race. Some might say it’s given up.
But that view is too simplistic. Because if you only look at Japan’s domestic roads, you’ll miss the bigger picture.
Buying Time for the EV Transition
To understand why Japan’s auto giants are not charging full-speed into battery-electric vehicles, look at Toyota’s multi-pathway strategy. Rather than going all-in on BEVs, Toyota is spreading its bets across hybrids, plug-in hybrids (PHEVs), hydrogen fuel cells (FCEVs), and eventually pure battery-electric vehicles (BEVs).
Why? Because it sees the global transition as fragmented and uneven.
While Western markets accelerate toward BEVs, Toyota continues to cash in on hybrids — especially in Japan and markets, where charging infrastructure and energy policy still lag.
Hybrids are cheaper to build, don’t require charging infrastructure, and still significantly reduce emissions. Toyota expects these to peak around 2030 — buying the company time to scale BEV technology, cut battery costs, and ensure demand justifies the shift.
Toyota’s cautious approach in Japan is also driven by the extensive impact that a rapid shift to EVs would have on the broader industrial landscape. As the country’s largest company and a cornerstone of its manufacturing sector, Toyota’s management carries a deep sense of corporate responsibility.
Millions of jobs still depend on combustion engines and hybrid systems. A gradual shift gives the ecosystem time to adapt.
Honda, though smaller, is following a similar path. Amid sluggish EV demand, it is expanding its hybrid lineup while keeping its longer-term target of 100% electric by 2040. In the short term, this helps Honda save EV 3 trillion yen (US$ 20 billion) in investment.
This isn’t short-sightedness. It’s strategic patience — and a way to protect their balance sheet and the vast supply networks that power Japan’s auto industry.
The Solid-State Race
There’s another critical layer to Japan’s EV playbook: advanced battery technology. While most global automakers focus on scaling current lithium-ion technology, Japanese OEMs are targeting the next leap — solid-state batteries.
Toyota, Honda, and Nissan have each publicly committed to developing solid-state batteries in the second half of the decade. These next-gen batteries promise faster charging, longer range, better safety, and lower cost per kilowatt-hour. Toyota aims to commercialize solid-state packs by 2027–28, potentially offering over 1,000 km of range on a single charge.
This emphasis reflects Japan’s strengths: long-term R&D, materials engineering, and cost-efficient manufacturing. But it also shows why Japan’s auto manufacturers may appear cautious in the short term.
Big Bets – But not in Japan
When we turn our focus to the global market, the story begins to shift. Despite sluggish EV uptake in Japan, the country’s auto giants are investing aggressively elsewhere.
Take North America. In April, Toyota started production at its first battery production facility in the U.S., located in North Carolina. This multi-billion-dollar plant is central to Toyota’s global electrification roadmap.
Once at full capacity, the Liberty plant will produce enough batteries to power hundreds of thousands of vehicles annually — most of them destined for the U.S. market. The majority of batteries will be for the growing hybrid fleet first, but will shift to pure electric vehicles once Toyota releases more BEV models.
Honda, meanwhile, has delayed its North American EV production hub in Ontario, Canada by at least two years. But it hasn’t changed its long-term goal — only reduced the speed amid uncertainty around global trade and tariffs. Honda still aims for 100% electric and fuel cell vehicles by 2040, with ongoing investments in North America and a partnership with LG Energy Solution to build a joint battery plant in Ohio.
In China, the story is similar. Toyota has announced to build a new Lexus factory in Shanghai to produce EVs and batteries. The facility will begin operations as early as 2027 at an expected initial capacity of roughly 100,000 vehicles a year.
Honda, which has suffered a 30% sales decline in China in 2024, is undergoing a rapid strategic shift there. The company has announced to go all-electric in China by 2035. While slashing production of internal combustion vehicles, it is reallocating capacity with two dedicated EV production facilities in China and six new models in the pipeline.
Even cash-strapped Nissan isn’t shying away from investing in China’s EV market. Despite a drastic global restructuring plan that includes closing seven factories, the struggling automaker is doubling down on China. At the Shanghai International Motor Show last month, Nissan China chief Stephen Ma announced plans to invest an additional $1.4 billion into EV factories there and roll out ten new models for the Chinese market.
Will that be enough to reverse its declining sales in the world’s most competitive EV market?
What’s noteworthy is that Nissan isn’t just targeting China’s domestic market. The company has been surprisingly outspoken about plans to use China as a global EV export hub (except for the U.S.) — a move that could reshape its international footprint and competitiveness.
So, have Japanese OEMs given up on EVs?
Their strategy may look slow compared to the rapid rollouts in China or elsewhere. It can even feel like Japan has been caught in yet another “Galápagos syndrome” — developing along a unique, insulated path where the EV revolution hasn’t quite arrived yet.
But it’s too early to count Japan’s OEMs out yet.
Yes, Japan Inc. has often been criticized for struggling with bold, fast-paced decisions. But this isn’t about reluctance — it’s about choosing a different, more measured path.
Toyota and Honda, in particular, are profiting from strong global demand for hybrids — giving them both the cash flow and breathing room to invest in next-gen technologies like solid-state batteries and future EV platforms.
That said, the competition isn’t standing still. Chinese, US, and European rivals are pressing ahead — not just in production scale, but also in software, user experience, and vertical integration. If Japan’s automakers want to remain relevant in the long run, they’ll need to accelerate their transformation — because the global EV shift is no longer a future trend, but a present reality.
Talk soon.
Pascal Gudorf