BYD: China’s cheap EVs charge up Japanese market

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In Japan, loyalty to local automakers keeps sales ticking up. Over 80 per cent of the market is dominated by domestic companies. But that stronghold is about to be undone by the electric revolution.

Japanese carmakers have been late to switch. That leaves a gap wide enough for Chinese rivals to drive through. On Wednesday, BYD launched its second model for the Japanese market. The Dolphin, a compact electric car priced at Y3.6mn ($24,000), follows the flagship midsize SUV Atto 3 released earlier this year.

The Dolphin is priced in line with small gasoline-powered cars. It is eligible for local subsidies, bringing the price down further. Price is an increasingly important factor for Japanese consumers. Real wages fell for the 16th straight month in July and have remained largely unchanged for almost three decades. That erodes purchasing power.

Chinese carmakers have also been quick to adapt to local needs. Japan’s ageing population has resulted in an increase in accidents that involve seniors and so-called pedal misapplication. BYD’s Japanese version has been tweaked to add a safety system that suppresses unintentional acceleration.

Sales trends in Europe are encouraging. Chinese EV makers were once not expected to gain a following outside of their home market. But they have rapidly expanded their market share. Growth has been especially strong in Germany, where 28 per cent of imported passenger cars with electric motors came from China in the first quarter of the year — triple the previous year.

Shares in BYD have fallen this year. But they still trade at 22 times forward earnings, twice that of Toyota. This reflects the company’s long-term growth potential outside China. Japan will contribute to that. It lacks local EV alternatives and demand for low-priced options is rising. Unless Toyota can produce a Dolphin of its own, Chinese EV sales in Japan could even outpace the company’s take-up in Europe.