Japan Institute for National Fundamentals
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Speaking out

Koko Kato

【#1104】EVs Deviating from Global Trends

Koko Kato ／ 2024.01.11 (Thu)


January 10, 2024

　
When the New York Stock Exchange opened on January 3, Bloomberg reported investors’ short selling of shares in Chinese electric vehicle (EV) maker BYD. The stock price of Tesla, a major U.S. EV manufacturer, also dwindled due to a bad reputation for its Cybertruck pickup truck for which delivery has just started.

In 2024, Western media predict a slowdown in EV demand and the arrival of a hybrid electric vehicle (HEV) boom. In the U.S. market, demand for EVs has declined remarkably. General Motors and Ford are pulling out of huge EV projects due to concerns about their profitability and are increasing investment in cars with internal combustion engines. The reason is simple: Even if they build EVs, they won’t sell. Vehicles with internal combustion engines account for more than 90% of the U.S. auto market, while EVs’ share is only 5.6%.

Slowing EV demand in U.S. and European markets

In the year for the U.S. presidential election, one of election campaign issues is whether EVs or internal combustion engine vehicles should be promoted. The Biden administration has tax incentives to support batteries and EVs made in North America. Former President Donald Trump, on the other hand, says, “I think hybrids are good. Of course, we also need gasoline cars. When I become president, I will make sure that you can buy any car you want.” He also argued passionately that domestic production of automobiles is the most important issue for national security. Trump has struck a chord with many auto parts factory workers who fear that they might lose their jobs.

The decline in EV demand is not limited to the U.S. The German government has announced the suspension of EV subsidies ahead of schedule, while the layoff of temporary workers at EV plants has begun. China’s BYD is also reaching out to HEVs and plug-in hybrid electric vehicles (PHEVs) in addition to EVs.

Important perspective of supporting domestic industries

This kind of news is a taboo for Japanese media, which have been trumpeting the EV shift, and is rarely covered. The Japanese government is also lagging behind the international community and has invested massive subsidies in the fiscal 2023 supplementary budget only to increase EVs.

But an important argument is missing. The trend of the times is determined not by politics but by users. EVs currently account for less than 2% of the Japanese auto market. The EV market has been created by the government with subsidies. Under the name of environmental protection, users are forced to endure inconvenience.

Another point that is missing is the perspective of how to protect domestic industries, as noted by Trump. Japan’s automobile industry is the only industry in the country with high international competitiveness that produces 30% of new cars sold worldwide. According to a Teikoku Databank survey on the impact of EV diffusion (released on August 24, 2023), 49.2% of automobile-related companies answered that the spread of EVs would have a negative impact on their earnings.

It is said that the switch from gasoline vehicles to EVs will result in a loss of 300,000 jobs out of about 3 million at automotive parts manufacturers in Japan. The government should take this figure seriously before supporting the spread of EVs.

Koko Kato is a director at the Japan Institute for National Fundamentals and Managing Director of National Congress of Industrial Heritage