Japan's Big Three Automakers Under Pressure: Lagging EV Transition, Losing Market Share, and Restructuring

Japan’s three largest automakers—Toyota, Honda, and Nissan—are simultaneously grappling with multiple challenges, including declining profitability, shrinking global market share, and setbacks in their electrification strategies. Financially, Honda reported a net loss of ¥423.9 billion for fiscal year 2024—the company’s first annual loss since its listing in 1957. Nissan has posted negative profits for several consecutive years, while Toyota forecasts a 22% year-over-year decline in net profit for the fiscal year ending March 2027, marking its third straight year of profit contraction. In key global markets, Japanese automakers are showing signs of weakness. Sales in China have halved compared to peak levels; rising costs due to tariffs are pressuring margins in the U.S.; and exports to the Middle East have declined amid disruptions to shipping through the Strait of Hormuz. Strategically, all three companies have misjudged the pace of their EV transitions. Honda has abandoned its goal of achieving full electrification by 2040 and canceled development plans for three EV models destined for North America. Nissan, lagging significantly in electrification, has been forced to cut costs by closing seven plants and laying off 20,000 employees. Toyota continues to pursue a “multi-pathway strategy” encompassing hybrids, battery electric vehicles (BEVs), and hydrogen fuel cells, but progress in the pure EV segment remains sluggish. In terms of product portfolios, Honda offers only four hybrid models in the U.S.—far fewer than Toyota’s 29—and lacks sufficient coverage in high-margin segments. Although Nissan has shortened its new vehicle development cycle to 26 months, it has yet to establish differentiated competitiveness. Governance issues have also come to the fore. At Honda, former executives jointly pressured current CEO Toshihiro Mibe to resign, ultimately resulting in Mibe retaining his position after accepting a 30% pay cut. At Nissan’s shareholder meeting, some investors proposed reappointing former CEO Carlos Ghosn. Meanwhile, Toyota’s newly appointed CEO Koji Sato acknowledged internal redundancies and inefficiencies and announced plans to streamline derivative vehicle variants. In response, all three automakers are adopting retrenchment strategies: Honda has exited the South Korean passenger car market, Nissan is reducing its global model lineup, and Toyota is cutting production both domestically and overseas. Simultaneously, they are doubling down on hybrid vehicles to stabilize their core business and increasingly drawing on Chinese supply chains and technological expertise to accelerate electrification. Honda has established a New Energy Strategy Office in China, directly adopting local solutions for batteries, motors, and intelligent cockpits. Nissan explicitly stated it will learn from China’s strengths in technology, cost control, and R&D efficiency. Regionally, Japanese automakers have suffered systemic setbacks in China and failed to integrate the Chinese market into their global R&D frameworks in a timely manner. While they still maintain some resilience in North America and Japan, they remain vulnerable to external pressures such as tariffs and geopolitical conflicts. On the supply chain front, Japan’s auto parts industry is pushing to standardize defect assessment criteria to better manage raw material supply risks and competitive pressure from Chinese component suppliers. Overall, Japan’s automotive industry is undergoing a period of structural adjustment. Its ability to maintain its stronghold in internal combustion engine and hybrid vehicles while building genuine competitiveness in the electric and intelligent vehicle arena will determine its future standing in the global automotive landscape.