The automobile industry in Japan is an essential pillar of Japan’s economy. Companies like Toyota, Honda, and Nissan are industry leaders not only domestically, but also globally. State-of-the-art engineering and technology make Japanese cars a desired commodity throughout the world. Exports in the automotive industry, most of which are automobiles, comprise a substantial share of Japan’s total exports, underlining the central position this industry occupies in the Japanese economy.
The automotive sector consists of various sub-industries, including automotive production, sales and services, materials and equipment supply, fuel and recycling, and road transport. Together, the industry sector provides millions of jobs, making up a considerable chunk of Japan’s labor market. Although production sites and target markets of Japanese automobile manufacturers have expanded globally, the companies’ connection to the domestic market is still strong.
The domestic market environment
The number of vehicles in use increased slightly over the last few years, despite Japan’s shrinking population, indicating a sustained demand for personal mobility. While rural areas have a high car ownership rate per household, people in metropolitan areas tend to rely on the public transportation system. Japan has a well-developed road network infrastructure. While Japan’s railroad system or aviation fleet are common methods chosen for passenger transportation, much of Japan’s freight is transported via roads.
The government supports the domestic development of new technologies such as autonomous driving. Therefore, auto-pilots for traffic jams capable of level 3 autonomous driving have become legal on Japanese streets. On a different note, the electrification of cars has not caught on with the general public in Japan, as the share of sales of electric vehicles was still very low. Among new next-generation passenger cars, hybrid vehicles found the highest appeal, showing the reluctance of Japanese consumers to part ways with fossil fuel-based propulsion technologies.
Small cars – big sales
The peculiarities of Japan and its society – such as the limited space, its aging society, the increase in single households, and the economic stagnation of the past decades – have shaped the way the domestic automobile industry has evolved. One of the industry’s unique characteristics constitutes the development of the light motor vehicle – the so-called kei car. After their market launch, light motor vehicles quickly gained in popularity. In 2022, domestic sales of the best-selling kei car model outperformed the best-selling standard-sized car model in terms of units sold.
Although many kei cars (also called mini vehicles) are passenger cars, a significant number of them are mini trucks and other special-purpose vehicles. Kei models increasingly use hybrid propulsion technologies, as these have become more affordable, and battery technology more efficient and reliable.
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