Japan’s new car market is notorious for favoring domestic brands, making it a challenging market for foreign car manufacturers to penetrate. While some foreign cars can be spotted on Japanese roads, the majority of Japanese car buyers prefer their homegrown brands. This preference has made it difficult for international companies to establish a significant presence in Japan’s automotive market.
One such foreign company attempting to make inroads into Japan is the Chinese automaker BYD. Known for its rapid expansion in Europe, Latin America, and other parts of Asia, BYD’s entry into the Japanese market has garnered significant attention. Despite facing obstacles, there are indications that BYD is just beginning its journey in Japan.
BYD’s foray into Japan is the focus of today’s edition of Critical Materials, a daily digest of essential industry and technology news. In addition to BYD’s efforts in Japan, we will also explore warning signs in the U.S. auto sector and Mercedes-Benz’s innovative strategies to reduce its carbon footprint.
BYD’s Strategy in Japan: A Familiar Playbook
Japan has a unique automotive landscape characterized by a preference for small, fuel-efficient vehicles. Traditional Japanese brands dominate the market, while premium European brands are favored by those seeking foreign luxury cars. Plug-in vehicles have struggled to gain traction in Japan, with Tesla and Nissan being notable exceptions.
Given these challenges, BYD’s entry into the Japanese market was met with anticipation. However, reports suggest that the company has faced difficulties in gaining a foothold in Japan. To boost sales, BYD has resorted to aggressive price cuts, reminiscent of its tactics in other markets.
Despite opening multiple sales locations and introducing new models, BYD sold only 5,300 vehicles in Japan between January 2023 and June this year. In an effort to stimulate demand, the company is offering discounts of up to ¥1 million ($6,700), aiming to slash prices by as much as 50%. The Atto 3, one of BYD’s models, is priced just under ¥4.2 million.
BYD’s lineup in Japan includes the Sealion 7 and Atto 3 crossovers, the Seal sport sedan, and the Dolphin compact. The upcoming kei car-sized EV is expected to fill a crucial gap in BYD’s offerings, catering to Japan’s specific automotive preferences. However, convincing Japanese consumers to choose BYD over established local brands like Honda, Daihatsu, and Suzuki remains a challenge.
Despite Japan’s relatively small new car market compared to the U.S., BYD’s interest in the country extends beyond sales figures. According to industry analysts, the company’s focus on Japan is about gaining recognition and credibility among discerning consumers.
“Winning Japan isn’t the point; leaving a mark is. Earning even a sliver of recognition from the most demanding customers in the world matters for BYD,” said Tatsuo Yoshida, a senior auto analyst at Bloomberg Intelligence.
While BYD’s journey in Japan may be challenging, the company’s persistence and innovative approach could pave the way for future success in this competitive market.
What BYD really wants is not just to make sales in Japan, but to establish a track record of doing business with the world’s most discerning and quality-conscious customers. This desire goes beyond mere economic rationality; it is about positioning BYD as a global powerhouse on par with industry giants like General Motors, Toyota, and Volkswagen. The company’s ambition to be taken seriously on the global stage is a driving force behind its expansion into the Japanese market.
However, the strategy of slashing prices to gain market share carries significant risks. While it may help BYD make inroads in Japan, it can also have negative consequences such as lower resale values, reduced profits, and strained relationships with dealers and suppliers. The Chinese government has had to intervene to curb such practices, highlighting the costs associated with aggressive pricing strategies.
60%: Why Car Sales Are An Economic Warning In America
Car sales are often seen as a barometer of economic health, reflecting consumer confidence and spending patterns. When car sales are strong, it is typically a positive sign for the economy. Conversely, a slowdown in car sales can signal trouble ahead.
As the third quarter of 2025 draws to a close, car sales in the U.S. appear to be robust, fueled in part by aggressive deals and incentives. However, concerns linger about the sustainability of this trend as incentives expire and average new car prices remain high.
The looming question is what will happen in the fourth quarter, when incentives dry up and buyers face sticker shock from high-priced vehicles. The recent performance of companies like CarMax, which reported a significant drop in sales and profits, underscores the challenges facing the auto industry. Factors such as tariffs, electrification costs, and shifting consumer preferences are contributing to a sense of uncertainty in the market.
As automakers adjust their strategies to navigate these challenges, we may see more aggressive pricing tactics, like Ford offering lower interest rates on unsold inventory or Honda discontinuing models that fail to meet expectations. The industry is in a state of flux, with both opportunities and risks on the horizon.
But as the tax credit expiration looms, it will be interesting to see how new car sales will be impacted for the rest of 2025. Will buyers continue to flock to EVs for the discounts, or will they shift back to traditional gas-powered vehicles?
One thing is for sure, automakers are doing everything they can to entice buyers. Mercedes-Benz’s development of low-carbon aluminum for their electric vehicles is just one example of the industry’s commitment to sustainability and innovation. And with other brands offering steep discounts on EVs, there’s never been a better time to consider making the switch to electric.
As we look ahead to the future of the automotive industry, it’s clear that the landscape is rapidly changing. Whether it’s through new technologies, government incentives, or consumer preferences, one thing is certain – the only way forward is towards a more sustainable and environmentally-friendly future. As we approach the end of the year, many are wondering what the future holds for electric vehicles (EVs) in Q4. With tax credits potentially expiring, fewer EV models on sale, and deals becoming harder to find, the landscape of the EV market may be shifting.
One of the key factors to consider is the impact of the potential expiration of tax credits for EVs. These credits have been instrumental in driving the adoption of electric vehicles, making them more accessible and affordable for consumers. If these credits are no longer available, it could have a significant impact on the demand for EVs.
Additionally, with fewer EV models on sale, consumers may have limited options when it comes to choosing an electric vehicle. This could potentially slow down the growth of the EV market and make it more challenging for consumers to transition to electric vehicles.
Furthermore, deals on cars of all sorts may be harder to find as automakers adjust their strategies in response to changing market conditions. This could mean less incentives and discounts for consumers, making it more difficult to find a good deal on an electric vehicle.
On the other hand, some automakers may choose to keep incentives strong through the end of the year in order to boost sales and meet their targets. This could result in a surge of EV sales in Q4, with the “real” results being seen in January 2026.
Overall, the future of EVs in Q4 is uncertain, and much will depend on how automakers and consumers respond to changing market conditions. It will be interesting to see how the EV market evolves in the coming months and what impact it will have on the industry as a whole.
What are your thoughts on the future of EVs in Q4? Share your opinions in the comments below.
Contact the author: patrick.george@insideevs.com