Remade in China? Japan's Auto Industry at a Crossroads

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The 21st Shanghai International Automobile Industry Exhibition opened on April 23. It showcases the rapid rise of Chinese automakers, driven by strong government support for electric vehicles (EVs) and other new energy technologies. Amid mounting challenges, Japanese automakers like Toyota are staging a comeback by doubling down on localization in China.

With added uncertainty from policies such as the United States' auto tariffs under Donald Trump's administration, the outcome of the competition with Chinese manufacturers remains unclear.

Hyundai and Kia Skip Event

"China is now a leading market in advanced technologies such as electrification and intelligent systems," emphasized Li Hui, General Manager of Toyota China, at a local press event on April 23.

EV adoption and artificial intelligence (AI) utilization have advanced in China, and domestic manufacturers continue to gain momentum. According to the China Association of Automobile Manufacturers (CAAM), the share of Chinese brands in passenger car sales, which hovered around 40% until around 2020, has now surged to nearly 70%.

In contrast, foreign manufacturers are struggling. In 2025, South Korea's Hyundai and Kia opted not to participate in the show. Chinese media reported this as a "strategic decision" to prioritize the US market over China, where sales have been sluggish.

*The logo of South Korea's Hyundai Motor Company displayed at a car dealership in Miami, United States (Getty/Kyodo).*

Chinese Carmakers Emerge as Global Competitors

Japanese carmakers are scrambling to overhaul their strategies. In February, Toyota announced it would build a new EV factory for its luxury brand Lexus in Shanghai, with production expected to start in 2027. The goal is to quickly deliver EVs tailored to local demand. Honda also opened dedicated EV factories in Wuhan (Hubei Province) and Guangzhou (Guangdong Province) in 2024.

Chinese automakers are also emerging as formidable rivals in overseas markets. According to the CAAM, China exported 5.85 million vehicles in 2024, a dramatic rise from 1.02 million in 2019. BYD, China's largest EV maker, built a new factory in Thailand in 2024 and is expanding its overseas production and sales network. The company aims to more than double its overseas sales this year to over 800,000 units.

Tariff War Brings Uncertainty for Chinese Makers Too

The intensifying tariff war between the US and China is another critical factor in the Chinese market. Ford Motor Company has reportedly halted exports of vehicles made in the US to China, while Tesla has stopped accepting new orders in China for some models produced in its US factory.

So far, however, the impact on Chinese automakers appears limited. Chinese media report that only about 116,000 Chinese-made vehicles were exported to the US in 2024, less than 2% of total exports. Chinese firms are focusing on markets outside the US, such as Europe, which means American manufacturers could be more affected in terms of exports to China. Still, with the US government reportedly pressing its trade partners to restrict trade with China, Chinese manufacturers have little reason for optimism.

(Read the article in Japanese.)

Author: Shohei Mitsuka, The Sankei Shimbun

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