Japan could lose 14% of its GDP and millions of jobs by stopping electric cars – report

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Japan, the world’s second-largest car exporter, risks a 14% drop in GDP if it doesn’t shift more quickly to electric vehicle production, according to a new report from the Climate Group.

The Climate Group is a non-profit organization founded in 2003 with the goal of inspiring global climate action. The group asked two of Japan’s early electric vehicle industry leaders to help compile this report: Kenichiro Wada, who led Mitubishi’s i-MiEV project and founded the Japan Electrification Institute, and Professor Masato Inoue, design director of the first Nissan Leaf and professor at the Turin Design Institute.

The report shows the status of auto sales in various regions, with Japan lagging behind major markets in Europe, China and the United States in domestic electric vehicle sales. Japan’s domestic hybrid (HEV) sales are relatively strong, but the country sells very few battery electric vehicles (BEVs) and plug-in hybrids (PHEVs).

Looking ahead, the report notes that many major auto markets plan to reduce or eliminate the sale of internal combustion engine vehicles in the 2030s. This will be necessary to meet the international climate goals to which Japan has committed itself. himself engaged.

And if Japan does not achieve these goals, the risk for Japanese industry, and therefore for the Japanese economy, is significant. The report notes that Japan, which already depends on auto manufacturing for nearly a fifth of its exports, could risk losing half of those auto exports, leading to the loss of 1.72 million jobs and $6 billion. dollars in automotive profits through 2040 and resulting in a 14% decline. in GDP.

Japan lags behind other’s goals

Japan’s national EV targets lag behind other major players. The EU is likely to ban new internal combustion engine (ICE) vehicles by 2035, the UK by 2030, and the US and China want 50% of new car sales to have sockets by 2030 and 2035 respectively (although US voters want 100% EV by 2030). But Japan has only pledged to “electrify” all new cars by the mid-2030s, which would include HEVs. This leaves the door open for up to 100% of its domestic sales to still be powered entirely by gasoline, with no ability to plug into the grid for cleaner electricity.

Japan has also refused to sign on to the all-electric COP26 2040 target (as have Germany and the US, although some US states have joined), which is a weak target to start with. Due to Japan’s intransigence on green energy and transportation, it received the “Fossil of the Day” award at last year’s climate conference.

And, while the country itself is a signatory to the Paris Agreement and the Glasgow Climate Pact, Japan’s auto industry captains have shown significant resistance to these efforts. Akio Toyoda, CEO of Toyota, by far Japan’s largest company, often spreads misinformation about electric vehicles, and the company pushes anti-EV propaganda both in advertisements and even in Japanese schools. The report notes that this misinformation is prevalent in Japan, with the popular perception that HEVs are more efficient than BEVs, which is not correct.

Japan has a fairly conservative corporate culture – so change comes slowly, especially if that change is suggested by outside sources. Honda, Japan’s second largest company, has never been much better than Toyota in this regard, but the company seems to be waking up and saying some of the right things under new CEO Toshihiro Mibe. Other Japanese automakers also have much lower ambitions for future EV production than their European and even American counterparts, with the possible exception of Nissan.

It’s important to shift transport to electric vehicles because gasoline-powered cars emit a lot of carbon. Even in Japan, which is a country with excellent rail systems widely used for public transport, transport remains the second most emitting sector of the economy. If Japan expects to reduce its emissions by 80% by 2050, an all-HEV scenario would only lead to about a 30% reduction in automotive emissions, while an all-BEV scenario would exceed the target of 80% of Japan.

It is therefore clear that Japan lags behind its international counterparts in this area. How will this affect Japan?

Japan faces dire economic consequences without action

The report suggests that Japan’s current trajectory and longstanding resistance to electric vehicles will significantly hurt its economy. About half of Japan’s domestically produced vehicles are exported (or 82%, if including vehicles produced overseas by Japanese companies), and Japanese companies supply 13% of the world’s passenger vehicles. That number could be drastically reduced if global markets lose their taste for Japan’s gas-guzzlers while everyone shifts to electric vehicles.

Given how much of Japan is employed in automotive-related industries, this could mean a massive loss of jobs for the country. About 8% of the Japanese workforce, or more than 5 million workers, are employed in automotive-related industries. The report suggests that Japan would lose 1.7 million jobs in auto-related industries as domestic vehicles produced for export were cut in half.

The switch to electric vehicles would not happen without a reorganization of current workers – with some work being lost in the supply of car parts, for example – but it also presents opportunities for new jobs, such as installing chargers or supply of batteries for national and international manufacture.

The situation is comparable to Japan’s former dominance over the semiconductor and appliance industries, which flourished decades ago. In both industries, Japan held a dominant position but became overconfident and did not react quickly enough to change, allowing competitors in China, Taiwan, South Korea, the United States and elsewhere to take market share. As a result, while Japan still exports a lot of electronics, its economy has become more dependent on the auto sector to bring in cash.

How Japan can move forward

It’s not all catastrophic, however. The report notes that Japan has a significant lead in electrification-related patents, although these are largely associated with hybrid technology rather than BEVs.

He also makes several political proposals for the future of Japan. He suggests that the Japanese government move quickly to take these steps:

  • Invest heavily in battery development, an area Japan has already experimented with through Panasonic’s supply of batteries to Tesla. This includes funding research into next-generation battery and semiconductor technologies.
  • Reduce or eliminate subsidies for consumer fuel cell vehicles, which Japanese companies have so far supported. FCEVs are unlikely to be relevant in consumer applications, but could be used in heavy-duty applications or other niches, and research should be supported in these niches, rather than consumer vehicles.
  • Develop a policy to scrap inefficient ICE vehicles and subsidize low-cost BEVs. Additionally, consider stricter regulations on vehicles that do not meet zero emissions criteria.
  • Designing “right to charge” laws to support home charging in condos and apartments, where many Japanese people live.
  • Install fast charging at highway service areas to allow for longer BEV journeys.
  • Developing the distributed power grid and vehicle-to-grid technologies.

Photo by Jezael Melgoza on Unsplash

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