Report warns Japan faces employment crisis and economic decline as auto industry lags on EV transition

• Research shows that inaction threatens almost 1.8 million jobs in Japan. 
• Japan could lose 50% of auto exports, more than 14% of GDP, and almost $700 billion (80-trillion yen) in profit by 2040 if no action is taken. 
• Policy recommendations, if implemented, will lead to growth of industry and employment.

10 May 2022, Tokyo, Japan – Japan faces a shrinking motor industry and economic decline if it does not quickly embrace the electric revolution taking place elsewhere in the global auto industry. This is the warning in a report launched today by international non-profit Climate Group, based on research by two highly respected Japanese auto industry experts, and using data from a collection of reputable sources[1].

Read the report in English here. 

Read the report in Japanese here.

The Climate Group report makes 12 policy recommendations on infrastructure, energy strategy, and subsidies to address the imminent crisis in the Japanese motor industry. The report also outlines that a shift from manufacturers must also be matched by ambitious policies to promote EV manufacture and adoption from the Japanese Government.

Sandra Roling, Head of Transport at Climate Group, says: The Japanese car market is still strongly focused on hybrids while the international one is rapidly moving to electric vehicles (EVs). Failing to be part of this change puts Japanese industry at a serious disadvantage.

“Whilst the manufacturers themselves have started to hear this message following COP26, the Japanese Government, too, must recognize the writing on the wall.”

Japanese industrial leadership is under threat

• Japan is the third largest auto manufacturing country in the world and boasts one of the largest automotive markets.
• Japan is also the world’s second-largest car exporter, supplying nearly 13% of passenger vehicles in 2019.
• 82% of cars produced by Japanese manufacturers are for overseas markets, which includes vehicles produced in Japan and exported, as well as those produced overseas.
• If exports overseas fall – the report warns that if the Japan automotive industry doesn’t transition to full electric vehicles, it could be by 50% by 2040 – it could lead to a loss of 1.72 million jobs, a 14% GDP slump and a catastrophic collapse of auto industry profits by as much as almost 80-trillion yen.

Urgent policy interventions required

Japanese manufacturers are starting to do what is needed. In an announcement in December 2021, Toyota said it would offer 30 electric models globally by 2030. In January 2022, the Renault-Nissan-Mitsubishi Alliance announced that they plan to invest $26.3 billion (3 trillion yen) to launch 35 new electric models by 2030.

Unfortunately, government policy is not following the market trends and consequently Japanese economic security is being put at risk.

Common misconceptions

The report launched today addresses several key misconceptions around EVs, and shows that:

• Even when the electricity used by the vehicles is created by fossil fuels, it is still better for the environment to use an electric car rather than a hybrid.
• Electric cars are more fuel efficient than hybrid models, and as the technology develops this is set to increase.
• Only fully electric vehicles will enable the decarbonisation of Japan’s automotive sector, which is needed for Japan to fulfil its commitment under the Paris Agreement.
• There is an opportunity for a job boom - the roll out of charging infrastructure is estimated to lead to the creation of more than 100,000 jobs in areas such as manufacturing, installation, and operational management.