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.
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.
About the Author:
Dr. Aya Adachi is an associate fellow in DGAP’s Center for Geopolitics, Geoeconomics, and Technology. She specializes in economic security, geoeconomics, and de-risking strategies. Her work focuses on analyzing the foreign economic policies of the EU, Germany, China, and Japan, with particular emphasis on their engagement with the Indo-Pacific and the Global South.