Key takeaways:
- China’s rise in electric vehicles (EVs) is not only a technological shift but an industrial shift. Chinese manufacturers are competing on scale, price, batteries, and vertically integrated supply chains across both advanced and emerging markets.
- While pioneering hybrid technology, Japan’s transition to battery electric vehicles was slow. It left it with a limited presence in China’s new energy vehicles market and exposed it to rising pressure in export markets.
- The EV transition has turned automotive supply chains into a geoeconomic issue. China’s dominance in battery materials, critical raw materials (CRM) processing, and EV battery manufacturing gives it strategic leverage over the global automotive transition, increasing vulnerabilities for foreign automakers.
- For Europe, Japan offers both a cautionary lesson and a potential partner. Its experience shows the vulnerability of CRM dependence, but also the value of resilience strategies in recycling, substitution, stockpiling, and supply-chain diversification.
- Europe needs both defensive and cooperative responses. To preserve its automotive industrial base, Europe must combine trade defense and industrial support with deeper partnerships with trusted partners such as Japan and South Korea to diversify supply chains and accelerate innovation.
Japan’s experience is particularly relevant for Europe. Like the European Union (EU), Japan hosts a globally competitive but mature automotive industry built around internal combustion technologies and complex international supply chains. Both are navigating the transition to electrification while facing growing competition from rapidly scaling Chinese EV manufacturers and similar exposure to supply-chain risks in batteries and critical minerals. Japan’s response therefore offers useful insights for European policymakers and industry leaders confronting comparable challenges.
This memo examines how Japan’s automotive sector is responding to these shifts. It first outlines the expansion of China’s EV industry and its implications for global competition. It then analyses the competitive pressure faced by Japanese automakers in EV markets and the upstream vulnerabilities linked to battery materials and critical mineral supply chains. The final section assesses the strategies adopted by Japanese firms and policymakers to adapt to this changing landscape.
You can read the full analysis here.
