BYD's Global Expansion Faces Challenges in Japan's EV Market

BYD is expanding its global presence but faces tough challenges in Japan, one of the world's largest automotive markets. The company is building electric vehicle (EV) charging stations and ramping up marketing campaigns and customer incentives in Japan, hoping to boost sales. BYD, backed by Warren Buffett, has become China’s largest EV manufacturer after years of rapid growth in its home market. However, despite its success domestically, penetrating the Japanese market has proven to be difficult.

Demand for EVs in Japan has long been sluggish. In 2023, the Japanese government changed the way EV subsidies are calculated, resulting in reduced subsidies for BYD and several of its competitors. This raised concerns about potential protectionism, as the government seemed to be favoring domestic automakers.

To attract Japanese consumers, BYD has offered discounts on the first 1,000 cars of its newest model and aired TV commercials featuring a famous Japanese actress. However, this strategy has led to higher-than-expected marketing costs. Despite the efforts, many Japanese remain hesitant to purchase expensive products from China due to concerns about quality. Additionally, the complicated political and wartime history between the two countries worsens consumer perceptions.

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At a BYD showroom in Yokohama, some visitors expressed that while BYD's cars seem appealing, they still doubted the quality of Chinese-made products. Yukihiro Obata, one visitor, noted that Japanese people generally believe that their domestic products are superior to those made in China or South Korea. However, he was also considering EVs from brands like Mercedes-Benz, Audi, and Hyundai.

Despite the skepticism, BYD continues to expand its presence in Japan. They have opened more than 30 showrooms and sold over 2,500 cars since their first showroom opened in February last year. For comparison, Toyota sold just over 4,200 EVs during the same period, while Tesla registered almost 17,000 cars by March 2023.

One of the main challenges for BYD is Japan’s government subsidies. In April 2023, the government revised its EV subsidy scheme, adding criteria such as the number of quick chargers installed by the manufacturer and after-sales service. This change reduced the subsidy for BYD's Atto 3 SUV by nearly half, from 650,000 yen to 350,000 yen. The subsidy cut affected sales, and BYD responded by offering 0% loans from April to June, along with cashback on home chargers in July and August.

To boost brand awareness, BYD launched television commercials featuring Japanese actress Masami Nagasawa. While this campaign brought in more customers, the company acknowledged that it had exceeded its marketing budget in Japan.

The subsidy change is seen as a government effort to protect the domestic automotive industry. Nissan and Toyota still qualified for the maximum subsidy of 850,000 yen, while Tesla received equal or higher subsidies for its models sold in Japan. Despite overall low EV sales, foreign brands accounted for nearly 70% of Japan's EV sales in the first seven months of this year.

For consumers like Kyosuke Yamazaki, the subsidy cut wasn’t a deterrent to buying a BYD Atto 3, even though he missed out on around $2,000 in savings by purchasing the car after April. Yamazaki was attracted to BYD’s longer driving range compared to Japanese rivals and didn’t mind buying a Chinese product because he had become familiar with BYD while working in Shanghai.

BYD's continued expansion in Japan will be closely watched, especially as the company nears the valuation of major American automotive giants like GM and Ford combined.