Japan is at risk of losing the race in all-electric vehicles (EVs). And that poses a danger for southern Ontario, with its three Japanese auto plants.
Among the 35 models in Bloomberg’s latest ranking of the best performing EVs only three are Japanese vehicles.
Toyota Motor Corp., the world’s biggest automaker, concentrates on hybrid vehicles, which it pioneered with the first gas-electric Prius a quarter of a century ago. As do most Japanese automakers.
As to all-electric vehicles, the Japanese industry, with backing from Japan’s powerful trade ministry, believes that largely unproven hydrogen fuel-cell technology (HEVs) is the key to reaching zero-emissions targets by 2050.
By contrast, Toyota’s rivals outside of Japan, spearheaded by Tesla Inc., are betting heavily on battery electric vehicles (BEVs) powered by lithium-ion batteries.
To be sure, most automakers still produce hybrids. And the Japanese industry makes some first-rate battery electric vehicles. It’s a matter of emphasis. In de-emphasizing battery electric vehicles, the Japanese industry risks sidelining itself in a $2.6-trillion (U.S.) auto industry that is adopting the technology at an accelerating pace.
Japan has ambitious targets for eliminating vehicle emissions. But in Japan’s commitment that by 2035 all vehicles be electric powered, it includes a proviso that electric vehicles include hybrids.
Hybrids are not all-electric vehicles, of course. They have two engines, one electric and one gasoline powered. Hybrids derive most of their power from gasoline and are only a transitional step away from traditional internal combustion engines (ICEs).
Any plan to truly decarbonize transportation that includes gas-electric hybrids is a dead-end strategy.
In fairness to the decision makers in Tokyo and Toyota City, hardly anyone anticipated the recent increase in battery electric vehicle adoption rates.
The U.S. adoption rate of 4.5 per cent is poised to soar with last year’s milestone U.S. climate bill, which provides hefty rebates to EV buyers.
That bill also funds a massive network of about 500,000 EV charging stations, the scarcity of which for now is cited by Japanese automakers in their reluctance about battery electric vehicles.
Canada is funding a network of 50,000 additional charging stations to round out the charging networks already in operation on major highways.
Battery electric vehicle sales were spurred last year by soaring gas prices in North America and energy insecurity in Europe following Russia’s invasion of Ukraine.
Almost 20 per cent of Chinese new vehicle purchases in 2022 were battery electric, a technology that China seeks to dominate.
The battery electric vehicle adoption rate for the European Union, which has banned the sale of internal combustion engines and hybrids by 2035, is closing in on 30 per cent by 2025.
Canada is catching up, with an EV adoption rate of more than seven per cent last year, and higher in B.C. (15 per cent) and Quebec (11 per cent), which boast Canada’s biggest EV buyer rebates.
Ontario has much at stake here.
Retrofitting for battery electric production is underway at the Ontario factories of General Motors Co., Ford Motor Co. and Stellantis N.V. (Chrysler).
But there are no such plans for Toyota’s assembly plants in Cambridge and Woodstock, or Honda’s automaking facilities in Alliston, though the Japanese firms do make hybrids in Canada.
The fate of those plants in a battery electric world is a question mark, though consumer behaviour in North America last year provides an ominous answer.
In last year’s weak North American market for auto sales, Canadian sales of Toyota vehicles dropped by 12 per cent, while Ford sales dipped by just one per cent.
And in the U.S., sales dropped sharply among the major Japanese automakers, including Toyota (down 9.6 per cent), Nissan Motor Co. (down 25 per cent) and Honda Motor Co. (down 33 per cent). Prius sales fell by 37 per cent.
GM, by contrast, was able to post a three per cent gain in sales. And Ford and South Korea’s Hyundai Motor Co. held their own, with sales down just two per cent for each.
A big distinction for the winners in the North American market in 2022 was significant sales increases for their battery electric vehicle models, which compensated for sales declines for many of their internal combustion engine models.
And those battery electric vehicle purchases are coming largely at the expense of the Japanese automakers, notably Toyota and Honda. S&P Global Mobility reports that purchasers of battery electric vehicles were more likely to have switched from a Japanese brand than from others.
It would be folly to count out Japanese automakers that have spent decades building formidable brand loyalty.
But many industry analysts say Japan is reaching a point of no return, where an eventual Japanese commitment to battery electric vehicles will come too late to reclaim lost market share.
Japan has ceded its leadership in consumer electronics (to South Korea and the U.S.) and in semiconductors (to South Korea and Taiwan).
It’s in no one’s interest that Japan follow that path in autos, not least the Ontario communities that rely on Japanese automakers for their robust economies.
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