An agreement on vital minerals between the United States and Japan was inked in Tokyo last March, ensuring both nations’ commitment to bolster supply chains and advance the technology of electric vehicle batteries. In particular, the agreement enables Japanese minerals to satisfy the sourcing standards for the United States EV tax subsidies, enabling a maximum of $7,500 for each vehicle.
Despite the agreement, Eurasia Group’s David Boling, director of Japan and Asia trade, remarked that if Japan and its car manufacturers wish to play a significant role in the field of electric vehicles, they need to catch up on a number of things.
In Japan, the uptake of electric vehicles has been slow. According to Nikkei Asia, Japanese automakers only made up less than 5% of the worldwide electric vehicle market last year, which was dominated by Chinese and western manufacturers. However, local auto manufacturers such as Toyota appear to be making an effort to narrow the gap.
During his first news conference, Toyota CEO Sato Koji revealed the company’s ambitions to introduce 10 brand new all-electric vehicles in 2026, with sales of 1,500,000 units annually.
In addition, in a statement released in April, Honda is also making plans to build more than 2 million units of electric vehicles a year in 2030, with the eventual aim of delivering entirely battery-powered vehicles across the globe in 2040.
Boling claims that car producers from Japan historically placed greater emphasis on hybrids as well as on hydrogen. Toyota is not alone in this; Nissan and Honda have just revealed considerable additions to their line-up of electric cars. The Japan Automobile Dealers Association claims that hybrid electric vehicles continue to make up 96.8% of all new electric vehicle sales across the nation.
The IEA, however, found that battery electric vehicles accounted for more than 70% of the total yearly increase in 2022, which is the primary factor in increasing electric vehicle numbers on global roads. The International Energy Agency further reported that the sales of battery electric vehicles are expanding quickly in China as well, rising by 60% from 2021 to 4,400,000 units.
Boling asserts that Japanese companies were reluctant to get going and might be incapable of participating in the electric vehicle race right now.
China is the source of crucial minerals that Japan needs to produce the components for electric vehicles. More than 90% of electric vehicles currently on the market consists of PMSM, which employs rare earth elements. In addition, according to the IEA, China is the country with the highest concentration of these rare earth elements.
Other than China, Japan consumes the most of these rare earth elements, such as dysprosium. If Japan wants to decrease its reliance on China for crucial minerals needed to produce electric vehicle parts, then there is still much work to be done for that to happen.
As Japanese companies struggle to catch up with EV makers elsewhere, entities such as Cenntro Electric Group Ltd. (NASDAQ: CENN) have a chance to establish themselves in the market and carve out a decent share of this rapidly growing industry.
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