The global electric vehicle (EV) market is growing rapidly to achieve carbon neutrality. However, the Japanese automotive industry is lagging behind in this market, leading to growing concerns. There are calls for the government and industry to work together to develop solutions.

In 2021, global EV sales reached approximately 6.6 million units, a threefold increase from 2019. In China alone, more than 3.5 million new energy vehicles, including EVs and plug-in hybrids, were sold, with a target of 5 million sales in 2022. In line with this trend, Toyota Motor has set a target of 3.5 million EV sales by 2030.

On the other hand, Japanese companies' EV shipments in 2022 were a mere 120,000 units. Tesla, currently leading the global EV market, operates large factories in the United States, China, and Europe. BYD of China has also emerged as the world's third-largest EV manufacturer. Moreover, European companies like Germany have embarked on full-scale EV production in line with their "de-diesel" policies. In this way, Japan is falling behind in the EV market.

There are several reasons why the Japanese automotive industry is lagging behind in the EV market. First, Japanese manufacturers, who have prided themselves on internal combustion engines and hybrid technology, have neglected EV technology development. It is also believed that they hesitated because large-scale EV production is costly and takes a long time to become profitable. However, their EV development was not entirely late. Japanese companies launched EVs, such as the i-MiEV by Mitsubishi in 2009, as early as the early 2010s. However, they failed to transition to full-scale production.

It would have been difficult to expand their business into EVs while maintaining their existing internal combustion engine production facilities, which are a source of revenue. The domestic market environment was not conducive to accelerating EV commercialization. In Japan, there were still concerns about EVs, such as a lack of charging infrastructure, safety concerns about lithium-ion batteries, concerns about battery costs, and reliance on overseas sources for key materials like rare earths. Furthermore, the COVID-19 pandemic made it difficult to obtain information from overseas markets, potentially leading to an underestimation of market changes.

Behind this complacent response of the Japanese automotive industry, there was also a practical issue of high costs associated with building an electric vehicle parts supply chain due to the vertical integration structure of automotive production. This is because parts suppliers had different circumstances, making it difficult to accurately assess where future turning points would lie.

Nevertheless, the Japanese automotive industry needs to respond now. EVs have significantly fewer parts than internal combustion engines. Many parts suppliers will be eliminated in the EV era, which will inevitably lead to employment problems. Moreover, if domestically produced EV parts or vehicles are made using coal-fired power, they could become subject to carbon border taxes implemented by countries like Europe. The country also has a high level of reliance on overseas sources for key components such as batteries and cells. It is time for the Japanese government and industry to join forces to build a domestic EV ecosystem.

Recently, there have also been concerns that Japanese companies are lagging behind in the "CASE" field, which refers to a major transformation in mobility, encompassing autonomous driving, connected vehicles, ride-sharing, and electric vehicles. In this situation, the EV industry can also be a great opportunity for the Japanese economy. Therefore, there is growing support for the argument that Japan needs to draw a big picture from the perspective of national industrial strategy. It is a call for Japan, which has fallen behind in the EV market, to strategically seize this opportunity.