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TM, HMC & Others to Watch as Japan Revs Up EV Goals

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Earlier this month, Japan moved another step ahead with its plans to ban the sale of new gasoline-powered vehicles by mid-2030s, in a bid to lower carbon emissions amid the heightening climate-change concerns. The plan is in sync with Japan’s Prime Minister Yoshihide Suga’s pledge of making the country carbon free by 2050.

Japan aims to come out with a more concrete plan by the end of this year to ban the internal combustion engine vehicles. If the phase out is actually implemented, all new vehicles sold in Japan by the mid-2030s will be hybrid or electric. This shift would be a significant one, given the fact that electric and hybrid vehicles currently constitute only 29% of the country’s 5.2 million new motor vehicle registrations, per Japan’s Automobile Manufacturers Association (JAMA).

Japan Boosts Electrification Plans

In an effort to tackle climate-change issues, it has become imperative for countries to curb fossil-fuel dependence by offering green transportation solutions to consumers. However, Japan has always been behind the curve when it comes to electric vehicles (EV). Per JAMA, both plug-in hybrid and EV registrations fell year on year in 2019.
 
A couple of months back, Prime Minister Yoshihide Suga committed that Japan would become carbon neutral by 2050. The government is working on a new stringent strategy aimed at reducing global warming by eliminating the use of traditional gasoline-powered vehicles, while also stimulating recovery from the economic slump caused by the pandemic. The government’s action plan for growth is to boost investment in latest technologies and develop competitive automotive batteries to achieve its electrification goals. To facilitate the shift from gasoline cars to electric and hybrid vehicles, reducing the price of lithium-ion batteries will be pivotal. In fact, the Japanese government is considering giving tax exemptions to companies that invest in production lines for new batteries that can contribute to the zero-emissions target.

Japan is the latest nation to phase out gasoline-powered car sales, after similar moves by other countries, including China, and Europe.

China is set to ban sales of conventional combustion engine cars by 2035. Last month, the U.K. accelerated its target to ban the sales of new gasoline and diesel cars by five years to 2030, while France intents to attain this by 2040. Singapore also plans to prohibit sale of combustion engine powered cars by 2040. In the United States, the state of California is set to eliminate sales of new gasoline cars by 2035.

Japanese Automakers in Focus

Amid such a scenario, let us take a look at how the Japan-based automakers are positioned in the EV space.

Toyota Motor (TM - Free Report) has been the king of hybrid vehicles since the introduction of the Prius. It has also been investing in fuel-cell vehicles like the Mirai, and sells the UX300e in Europe and China. However, the auto giant has been relatively slower in the adoption of EVs into its line-up and has no pure-electric offerings at the moment.
 
Nonetheless, Toyota, which currently sports a Zacks Rank of 1 (Strong Buy), is finally ready to tap the EV frenzy with the recent announcement of the upcoming launch of its electric SUV for Europe, followed by a U.S. model. The electric SUV for Europe will be based on Toyota’s e-TNGA modular EV platform and will be rolled out in the next couple of months. Also, collaboration with Subaru and Mazda is likely to aid Toyota's ambitious electrification goals.

You can see the complete list of today’s Zacks #1 Rank stocks here.
 
Nissan (NSANY - Free Report) has been a pioneer in EVs with its Nissan Leaf, which changed the way the world looks at EVs. Launching the first mass-market EV in 2010 was a risky bet, but Nissan has been committed to its e-mobility plans, with the Leaf sales recently hitting 500,000 units globally. The automaker is all set to enter the next phase of EVs with the launch of the all-new Nissan Ariya, which is Nissan’s first all-electric crossover, featuring an all-new EV platform. Ariya features Nissan’s years of EV designing and customer experience to deliver the most advanced EV ever.
 
While most automakers are betting on sedans and sport utility vehicles in their transition toward EVs, Honda (HMC - Free Report) has gone for a more compact all-electric car Honda e. Honda e is the company’s first-ever pure EV launched this year. The model will be sold in Europe and Japan. The company plans to roll out another fully-electric car in Europe by 2022. Moreover, Honda is planning a shift to electric power in its European cars before 2023, as part of wide-ranging plans to reduce its carbon footprint.

Honda strives to electrify two thirds of the global sales by 2030, wherein hybrids will form 50% of the mix, and BEVs and fuel-cell vehicles will account for 15%. Importantly, the company aims to electrify all European mainstream models and introduce six new electric models in the region by 2022.

Mazda (MZDAY - Free Report) is planning to launch its first mass-production, all-electric car in Australia in 2021. The 2021 Mazda MX-30 will have both all-electric and mild-hybrid variants.

Mitsubishi Motors also plans on bolstering its electric and hybrid vehicle ambitions by adding five or more electric and plug-in hybrid vehicles to its line-up in the upcoming years.

Last Words

Despite the auto sector being a major pillar of Japan’s economy, the country has been slower in embracing the EV revolution compared with other nations. Nevertheless, Japan is now boosting its efforts by plans of adopting a new strategy of eliminating combustion vehicles by 2035. If the policy is enforced effectively, it will definitely provide a boom to the Japanese economy. Japanese automakers are also revving up their EV game with all-electric launches, including Honda e, Nissan Ariya, Mazda’s MX-30, set to hit the markets in the days to come.

However, the government also needs to factor in consumers’ reaction to the new policy as hybrid and electric cars are somewhat more expensive than the conventional means of transportation. Apart from this, it will be a daunting task to reach consensus among the three stakeholders — the government, the auto industry and consumers — to create a win-win-win situation.

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