China’s EV Rise and the Strategic Challenge for Japan’s Automotive Industry
China’s rapid expansion in electric vehicle production is reshaping global automotive competition for both European and Japanese automakers. Japan —a pioneer in hybrid vehicles— is struggling to translate this leadership into battery electric vehicles (BEVs), as Chinese manufacturers rapidly scale production and exports. At the same time, China’s dominance in battery manufacturing and critical mineral processing exposes upstream vulnerabilities for Japan’s automotive industry. Together, these developments create a dual challenge: intensifying downstream competition in electric vehicle (EV) markets and continued dependence on Chinese-controlled supply chains.
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Key takeaways
Chinese manufacturers are competing on scale, price, batteries, and vertically integrated supply chains across both advanced and emerging markets.
It left it with a limited presence in China’s new energy vehicles market and exposed it to rising pressure in export markets.
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.
Its experience shows the vulnerability of CRM dependence, but also the value of resilience strategies in recycling, substitution, stockpiling, and supply-chain diversification.
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.
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China’s EV Rise and the Strategic Challenge for Japan’s Automotive Industry
Center for Asian Studies
Asia is a nerve center for multiple global economic, political and security challenges. The Center for Asian Studies provides documented expertise and a platform for discussion on Asian issues to accompany decision makers and explain and contextualize developments in the region for the sake of a larger public dialogue.
The Center's research is organized along two major axes: relations between Asia's major powers and the rest of the world; and internal economic and social dynamics of Asian countries. The Center's research focuses primarily on China, Japan, India, Taiwan and the Indo-Pacific, but also covers Southeast Asia, the Korean peninsula and the Pacific Islands.
The Centre for Asian Studies maintains close institutional links with counterpart research institutes in Europe and Asia, and its researchers regularly carry out fieldwork in the region.
The Center organizes closed-door roundtables, expert-level seminars and a number of public events, including an Annual Conference, that welcome experts from Asia, Europe and the United States. The work of Center’s researchers, as well as that of their partners, is regularly published in the Center’s electronic journal Asie.Visions.
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