Japanese Automakers Lose Ground in China, Pivot to Emulating Chinese EV Models

By 2025, Japanese automakers’ market share in China has dropped to 18% from 42% in 2018. Previously, brands like Toyota, Honda, and Nissan dominated nearly half of the market thanks to the reliability and fuel efficiency of their internal combustion engine vehicles. However, as China’s electric vehicle (EV) industry rapidly rose, Japanese automakers—having long focused on hybrid and hydrogen fuel cell technologies—failed to pivot promptly to battery-electric vehicles, leading to a decline in competitiveness. Today, BYD, Geely, and Tesla together account for over 60% of China’s EV market. To address this challenge, multiple Japanese automakers have begun adopting strategies of imitation and collaboration, actively learning from China’s expertise in battery technology, in-vehicle software, and full industrial chain integration. Toyota and BYD jointly launched the bZ3 model and plan to introduce three additional co-developed vehicles by 2027, while also replicating lithium iron phosphate (LFP) battery production lines. Honda is exporting EVs manufactured in China back to Japan and has formed a joint venture with CATL to build a battery plant, incorporating Chinese quality control standards and software iteration practices. Nissan announced a $2.5 billion investment to partner with NIO on battery-swapping infrastructure, sourcing all core components from Chinese suppliers. Additionally, Mazda is developing an electric SUV based on Changan Automobile’s platform, while Subaru is co-developing a new EV platform with Geely. Numerous Japanese automotive parts suppliers are also increasingly relocating operations to China to benchmark against the country’s supply chains and technological systems.