When I joined Porsche Japan after several years at a Silicon Valley company, I gave my team one instruction above all others: move fast. And whenever someone told me, with complete sincerity, “chakujitsu ni ganbarimasu” (”I will work at it steadily and diligently”), I pushed back on the spot.

It was not that I doubted their commitment. In Japan, that phr…

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I. Japan’s Bet on Physical AI

Japan has spent thirty years in what it calls the lost decades, and the plural has stopped sounding ironic. The population is ageing and shrinking. The economy has barely grown. Cars and manufacturing, once the country’s pride, are losing share to Chinese challengers and struggling in the age of AI. A culture built on harmon…

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Two scenes, one week

This week, at Makuhari Messe outside Tokyo, the Japan Mobility Show opened its doors. On stage, Koji Sato, chairman of the Japan Automobile Manufacturers Association (JAMA) and vice chairman of Toyota, put his industry’s worldview into a single sentence:

“No matter how software-driven the world becomes, the value software creates will…

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Last month Toyota announced that by 2028, models such as the Corolla and Yaris will offer L2++ — driving that barely requires a driver. In Japan, the debate still centres on electrification and hybrids; how far the country lags the rest of the world on autonomy goes largely unremarked. Tesla already sells L2++-equivalent functionality across America and Europe. It is a fact Japan prefers not to look at too closely.

Still, the announcement will be welcomed. The world’s largest carmaker is finally serious about this. For a country hollowing out demographically, with transport deserts spreading by the year, the technology is not a luxury — and Toyota’s reputation for safety lowers the bar for acceptance. The trouble is timing. By 2028, L2++ may already look late rather than early. The question is whether Toyota can still catch the next wave.

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II. The Hidden Architecture

Legally, nothing changes: this remains Level 2, with the driver still responsible and the system merely a sophisticated aid. Technically, it pairs an end-to-end model — one network handling everything from sensor input to steering — with guardrails to catch the unexpected, aiming for something close to hands-free driving in city traffic.

Pull the architecture apart, though, and a different design emerges: the brain is Toyota’s, but the body is NVIDIA’s. Toyota still insists that the driving model itself is being built in-house, by Woven and Toyota’s engineering core. The onboard computer will almost certainly be DRIVE AGX, running DriveOS, with training and simulation leaning on NVIDIA’s compute throughout. Given the 2028 deadline, buying an already-certified box is close to the only option left. But once you hand over the lower body of autonomy, you inherit someone else’s gait. The interfaces, the certifications, the OTA pipeline, the supply allocation — one by one, they all converge on a single vendor.

III. The Cost Wall

NVIDIA’s box works well enough as an expensive option on a luxury car. Try to make it standard equipment — or even an affordable option — on a mass-market model, and the chip’s price starts eating the car’s price. NIO has disclosed that, when it ran multiple Orin chips, silicon alone cost roughly $2,000 per vehicle; the company later switched to its own chip to bring that down.

The leaders have already responded to this arithmetic. Tesla is mass-producing HW4 and claims its next-generation AI5 will undercut NVIDIA on both cost and power efficiency. Rivian moved from Orin to its own TSMC 5nm chip and says system cost fell by roughly 30%. Even manufacturers without Tesla’s volume are choosing to stop buying rather than keep paying the premium — which makes it unsurprising that NIO, Li Auto, XPeng, BYD and Xiaomi are all drifting toward in-house silicon or Huawei.

None of this is easy. Building your own chip takes years and hundreds of millions of dollars. But once production scales, every unit sheds the margin that would otherwise go to a general-purpose SoC. If L2++ becomes just another feature on an ordinary car, the contest stops being about whose intelligence is smarter and becomes a contest of unit economics. Intelligence that loses on cost doesn’t scale; intelligence that doesn’t scale doesn’t collect data; intelligence that doesn’t collect data falls behind again. That cycle, more than any single feature war, is the real battlefield ahead.

IV. Two Wrong Answers

One possible answer is to catch up with Tesla and China on features by 2028, with L2++ as the equalizer. But by 2028, that same L2++ may already look like it arrived late, not early — there is no time left to rebuild the chip stack from scratch. Tesla is already selling supervised urban driving, built on cameras, its own silicon and enormous body of real-world driving data. Chinese makers are starting to offer similar capability in cheaper cars. If Toyota’s 2028 model amounts to autonomy that has “finally caught up,” it will be obsolete the day it is announced.

The second answer is to put NVIDIA’s expensive box in every model and try to win on price instead. Push that far enough, though, and a different problem appears: a Toyota that no longer looks like a Toyota. A Lexus buyer might accept that price tag. Put it in a Corolla or a Yaris, and something Toyota spent a century building — the promise of a car within everyone’s reach — quietly breaks.

Neither answer is the right one, and for the same reason: neither plays to the strength Toyota actually has.

V. The Real Winning Path

Climbing the same mountain as Tesla and Chinese makers, at the same speed, is simply not something a legacy manufacturer can do — and setting the pace themselves is harder still.

For a company like Toyota, surviving the autonomous era will probably come down to manufacturing the rules exactly as written, rather than authoring them. Waymo will decide the sensor layout and how much redundancy and uptime the system needs to guarantee. NVIDIA will decide the box itself, its power draw and what it takes to get certified. Someone still has to build tens of thousands of identical units to that specification, holding tolerance through ten years of rain — the way factory-floor robots hold takt time, or the way an iPhone’s components hold Cupertino’s drawings to the millimetre. That capability — the experience, the capacity, the sheer stubbornness required to build hardware this reliable — is not something an autonomy provider can easily acquire on its own.

Japan’s real advantage has less to do with freedom of imagination than with a craftsman’s discipline: filling someone else’s specification without breaking it, cheaply, at consistent quality. Passenger cars keep selling themselves; the autonomy prize sits in the body supplied to someone else’s autonomy stack. Robotaxis sit naturally on that extension: the intelligence, the dispatching and the permitting belong to someone else; the body, the thermal management, the vibration, the maintenance, the battery and the factory belong to Japan.

To be fair, out-engineering Tesla’s end-to-end system in passenger cars would require becoming the side that writes the rules — and as earlier essays in this series have argued, that has never really been Japan’s business. What Japan does best is executing someone else’s rules to the letter, at a volume no one else can match.

Become a subcontractor, or become physical AI’s most precise supplier. The first means surrendering control; the second means holding a different kind of it. Given Japan’s industrial history, its education system, the depth of its infrastructure, the direction Toyota should take is already visible. What remains is to let go of the idea of the “automobile” itself, and decide — deliberately, on its own terms — which part of the next market is worth taking.

Ken Maeda Bringing the inside view on EV & mobility across Japan and the world. Former Tesla Japan and Porsche Japan marketing executive. Founder, Undertones Consulting. Speaker & Author.

Since late last year, I have tested Tesla’s Full Self-Driving (FSD) in Texas, California, South Korea, the Netherlands, Germany, and Japan — six markets, each with its own road culture. In the US alone, I have logged more than 2,000 kilometers behind the wheel in Texas and California. The car takes you to your destination with almost no intervention. Tesla’s own safety data show accident rates well below the human average. On Germany’s Autobahn, the car held its composure at 150 km/h, then obeyed speed-limit signs the instant they appeared. In Amsterdam, it threaded cobblestone canal streets crowded with trams and cyclists, and navigated the narrow, tourist-packed lanes around Dam Square without hesitation. In Japan, still in testing, it handled the crush in front of Shinjuku Station without incident. Same software, radically different geographies and driving cultures, delivered through the same over-the-air updates. I have felt that scalability firsthand.

Legacy automakers, meanwhile, are struggling just to build EVs that turn a profit. Rebuilding software on top of a legacy ecosystem is a monumental task, and many appear to be buying time by extending the life of the internal combustion engine. On autonomy, they sign partnerships with tech companies and run “pilot programs,” but real-world deployment remains a distant promise. In Japan, when I describe my FSD experience, the reaction is predictable: “That’s not Level 4 or Level 5 yet.” The point is how many people you move — safely, efficiently, to their destination — not which SAE level you’ve hit. SAE’s classification system is useful for regulators and engineers. It is not a measure of value to the user.

Tesla has now begun rolling out v14.3.7. FSD V15 comes next, and the march toward unsupervised driving continues from there. The spread of this technology is shaking the foundations of the legacy auto industry.

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II. The Protagonists of 2030

Right now, in Western markets, the only companies deploying usable autonomy this broadly in production vehicles are Tesla and Waymo. China is a different story. Huawei’s ADS 3.0, XPeng’s XNGP, and Momenta are already shipping advanced urban driver-assistance in production cars, and iterating fast — in some respects faster than the West, thanks to a more supportive and coordinated regulatory framework and abundant access to domestic driving data.

By 2030, the mobility market will likely be split among a handful of very different players: Tesla running its own autonomy and robotaxi business, Waymo as a dedicated robotaxi operator, Chinese automakers building out their own domestic stack, and legacy automakers leasing the “brain” from an outside provider.

On robotaxi scale, Waymo is currently ahead of Tesla. It leads on commercial rides and on cities served. I have ridden Waymo often in Texas, and the experience is polished enough to feel like a private car rather than a taxi — quiet, unhurried, entirely your own space. Tesla’s strength lies in the speed of deploying the same stack into millions of consumer vehicles. Waymo’s strength lies in the depth of its dedicated robotaxi operation.

They are pursuing different models, both of which are already delivering real value. Between them, they are the ones building the market that comes next.

III. An Approach From Outside the Auto Industry

Tesla’s lead comes from an approach that runs against the grain of the auto industry itself.

Vertical integration is the foundation: hardware, software, and autonomy itself, all built under one roof. Tesla controls everything from parts sourcing to vehicle control to neural network training in-house, which compresses its development cycle far beyond what a supply-chain-dependent company can manage.

Then there's the sensor approach. Tesla committed early to a camera-only stack. This decision traded some redundancy for speed and cost advantages, allowing the company to deploy the system into large numbers of consumer vehicles and begin collecting real-world data at scale much earlier than approaches that rely on more complex sensor suites.

Underneath both sits the infrastructure. I have seen the training cluster known as Cortex at Giga Texas in person. Its scale is unlike anything else in the auto industry — rows of GPUs in a building that looks more like a data center than a car factory. This level of investment in AI infrastructure remains rare in the traditional auto industry.

IV. Can Legacy Automakers Catch Up?

Do legacy automakers have a real shot? Many people inside the industry sense the answer but won’t say it out loud. Building Tesla-grade vertical integration from scratch is close to impossible. Existing vehicles carry the architecture of the internal-combustion era — distributed ECUs, limited OTA capability. Before anything else, they need to rebuild as software-defined vehicles, which alone demands a fundamental overhaul of how they manufacture cars.

The more realistic path is strategic partnership with autonomy providers, paired with heavy reliance on external compute stacks like NVIDIA’s. The shift from modular, rule-based control to end-to-end neural networks is also unavoidable. Insist on building it all in-house, and hardware-centric companies will hit a wall on chip design and data scale. Actually, they may never even reach that wall. Tesla has already crossed that terrain and found its way through.

V. A Future Where Most Miles Drive Themselves

The future of mobility has moved past a domain where “build good hardware” is enough. Cars built for the joy of driving will still have a place. Tesla itself is preparing a new Roadster, and pure combustion performance cars like the Porsche 911 or Ferrari will remain for buyers willing to pay for the upkeep. Elon Musk has said that, going forward, more than 95% of miles driven will be autonomous. The shift of driving’s center of gravity from human to system is not going to reverse.

For most automakers, capability was never really the constraint; finding their way back to their mission is the harder problem. The auto industry’s founding purpose was to give more people freedom of movement — safe, efficient, and affordable. The joy of driving was always a secondary value layered on top. And yet so many legacy automakers are spending real engineering effort adding artificial engine sound to their EVs. I understand the instinct to preserve brand heritage, but that is not innovation. It is selling off brand equity and nostalgia. What they should be focused on is autonomy and modern, phone-grade software. Keeping a pure driving car in the lineup is understandable for an automaker — but the mission of the industry and the sentiment of the company should not be confused with each other.

Autonomous vehicles are a landmark product of physical AI. Seen that way, the manufacturing know-how legacy automakers have built over decades becomes an asset in the physical-AI era. Open up the tacit knowledge that has stayed locked inside these organizations, combine it with an autonomy stack, and a genuinely strong product becomes possible. Getting there in time is the hard part. It means moving the organization fast, setting aside the pride of being a legacy automaker, updating an old car culture's values, and forming real partnerships with autonomy providers to put outside capability to work.

What Tesla’s FSD is putting on the table is not simply a technology race. It is a redefinition of industrial structure itself — regulation, capital allocation, organizational culture, all at once. And that reckoning is already underway, well before 2030.

Ken Maeda Bringing the inside view on EV & mobility across Japan and the world. Former Tesla Japan and Porsche Japan marketing executive. Founder, Undertones Consulting. International Speaker & Author.

I. The June Numbers

It’s peanuts, in absolute terms. But it means a lot. BEVs and PHEVs together reached 5.48% of Japan’s new car registrations in June, including kei cars — the second consecutive monthly record, up from 4.83% in May. For the first half of 2026, the cumulative EV share stands at 4.1%, already well past the roughly 2.66% that defined all of 2025. For most of the past five years, that share sat stubbornly around 2% — never once threatening to break out.

Something is genuinely moving.

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II. Nissan Gave the World the Leaf. Japan Still Fell Behind.

It’s worth remembering that Nissan launched the Leaf in 2010 — the first mass-market EV from any major automaker, years ahead of Tesla’s mainstream push. Japan had the head start. It didn’t keep it.

For years, Japan’s carmakers assumed they’d set the pace of this transition themselves. Then, starting in the late 2010s, Tesla and China’s manufacturers stopped waiting for permission and simply defined the market instead. What followed wasn’t a recalibration — it was a retreat into a more comfortable story, one this newsletter has traced before: hybrids as the home team’s technology, BEVs as something being imposed from outside. Protecting that narrative, and the business built on it, became its own priority. Over the past five years, that instinct did as much as any technical constraint to keep Japan’s EV share pinned in place.

For most of the last six years, Japan’s EV share sat in the low single digits while the rest of the world moved from single digits toward a quarter of all car sales. June’s 6.8% (registered-car basis) is the first reading that looks like it belongs in the global conversation rather than a footnote to it. Which makes it worth asking, plainly: what actually changed?

III. Toyota and Tesla Are Doing the Heavy Lifting

Strip away the noise and two names explain most of this month’s growth.

Toyota’s bZ4X remains the single best-selling EV model in Japan on a cumulative basis, at 13,777 units for the year — still the anchor of the entire category.

Tesla had the bigger headline. June sales hit an estimated 3,997 units, up 183.3% year-on-year, making Tesla the #2 import brand in Japan for the first time ever — just 515 units behind Mercedes-Benz. Cumulatively, Tesla has sold 12,197 units this year (+165.8%), enough to climb into the top four best-selling brands in Japan overall, foreign or domestic.

Start with Tesla, because it went first. Tesla cracked the market open — and once it did, even Toyota, the most conservative name in a conservative industry, could no longer sit still. Toyota itself began to come around. In a country this resistant to changing course, that alone is the signal worth watching: when Toyota moves, it means the ground has actually shifted.

IV. Tesla: The Real Deal

Of the three drivers behind this shift, Tesla is the least ambiguous. The product is simply good — range, software, the Supercharger network’s ease of use — and Tesla has stacked that with Japan’s raised CEV subsidy (now up to ¥1.3 million for eligible models, versus ¥900,000 before this year) and a three-year free Supercharging offer that meaningfully lowers total cost of ownership. Add the Model Y L for larger households, and the value case for a Japanese buyer switching from a German import or a domestic sedan is no longer close. That part of June’s number reflects a genuine shift in preference, not a subsidy artifact. Something broader is happening underneath it, too: Japanese consumers are starting to see Tesla the way the rest of the world already does — not just another car brand, but the iPhone of the auto industry, the reference point everyone else gets measured against.

V. Toyota: Finally, an EV People Actually Buy

For years, Toyota’s BEVs functioned more as a CSR statement than a product line. The bZ4X changes that calculus, mostly through sheer distribution: Toyota’s dealer network is the largest in the country, so a modest push per store adds up fast — and yes, some of that cumulative number includes demo-car registrations, which inflate the early read. But strip out the caveats and the signal is still positive: Toyota has, for the first time, an EV with enough volume behind it to matter in the national conversation, not just the sustainability report. Whatever the caveats, this is unquestionably an important milestone — because for a notoriously risk-averse buyer, the Toyota badge itself functions as a guarantee of safety and reliability that no import brand, however good the product, can fully replicate.

VI. Honda’s Super-ONE: What Happens When Subsidies Meet a Genuinely Cheap EV

There’s a third name worth putting next to Tesla and Toyota: Honda’s Super-ONE. Its June volume barely registers in the headline numbers — which is precisely why it’s worth isolating from them.

Launched May 22 at a list price of ¥3.39 million, the Super-ONE effectively drops to around ¥2.09 million after the ¥1.3 million national CEV subsidy — and lower still with regional top-ups like Tokyo’s ¥600,000 add-on. The result: over 11,000 orders in the first 19 days. Delivery times stretched to seven or eight months. Honda paused new orders in June just to manage the backlog.

This is the clearest proof point in the entire dataset: when the effective price undercuts a comparable gasoline or hybrid car, Japanese consumers don’t hesitate. The demand was never the problem. The price was.

VII. So — Is the Laggard Waking Up?

This can fairly be called the first real signal. If it isn’t, that should worry everyone. What June actually shows is that Japanese consumers will move to BEVs the moment the economics clearly work — Tesla’s product-plus-incentive stack, Toyota’s first genuine BEV, Honda’s subsidy-collapsed pricing all point the same direction.

But none of those three is yet the car that decides this market. What’s still missing is a mainstream-sized, mainstream-priced domestic BEV — something that occupies the space a Corolla or a Vitz occupies today, not a premium import, not a kei car, not a CSR halo model. That car doesn’t exist yet.

Japan’s smartphone market offers a useful parallel: iPhone holds roughly two-thirds of the market here, the highest share of any major economy, well ahead of the US. Not because Japanese consumers are uniquely loyal to Apple, but because once enough people around you are carrying one, everyone else follows. Cars could work the same way, once EVs are common enough on ordinary streets — not just in Tesla showrooms — that adoption stops being a purchase decision and starts being the default.

That threshold hasn’t been reached yet. But three separate mechanisms — product quality (Tesla), a genuine BEV finally reaching mass-production scale (Toyota), and subsidies collapsing the effective price (Honda) — each independently pulled Japanese buyers toward a plug this year. None of them alone adds up to a mass market. Together, they’re real progress, not a mirage.

Layer on the broader currents — climbing gasoline prices, electrification continuing to advance worldwide, and the economics finally tilting in the buyer’s favor — and the shift looks less like a fluke. That 5.48% is small enough to ignore and large enough to be the opening argument. It’s the window sitting in front of Japan’s carmakers right now: not to catch up to Tesla’s version of an EV, or China’s, but to define what a genuinely Japanese EV looks like — mainstream-sized, mainstream-priced, built by companies people already trust. The window is open. Whether anyone actually walks through it is the story to watch next.

Ken Maeda Bringing the inside view on EV & mobility across Japan and the world. Former Tesla Japan and Porsche Japan marketing executive. Founder, Undertones Consulting. International Speaker & Author.

Japanese media has been full of stories about BYD lately. BYD has begun promoting RACCO, its new kei car, due on sale by the end of this month. An editor friend also mentioned that stories about the brand get unusually high traffic. At first glance, that might look like genuine enthusiasm for BYD among Japanese readers.

It isn’t. What’s being measured here is not affection but anxiety. Japanese consumers don’t much like Chinese cars, yet they cannot stop watching them. When BYD’s global exports rise, the reaction is indignation. When its Japanese sales stall, the reaction is a kind of told-you-so satisfaction. That both reactions exist at once is the giveaway: this is not curiosity. It is unease wearing curiosity’s clothes.

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The context is different, but the mechanism is familiar: in America, stories about Tesla and Elon Musk reliably draw readers too. In Japan, BYD plays that role instead of Tesla—a Chinese company, physically and culturally closer to home, and harder to treat as someone else’s problem.

Why BYD rattles Japan

Japanese cars, hybrids especially, are a source of real pride. As I’ve written before, this isn’t ordinary brand loyalty. It’s closer to a national self-image: proof of Japanese engineering skill. The electric vehicle, by contrast, is often treated as an outsider’s invention—something built by Tesla and Chinese firms, tolerated rather than embraced.

Into that mindset, BYD is launching RACCO, its first kei-class EV for Japan. The kei-car segment is not just another product category. It’s the result of decades of fierce competition among Japanese manufacturers, working within a strict size limit—no longer than 3.4 metres, no wider than 1.48 metres—that has forced constant refinement in ride comfort, fuel economy, price and safety. No foreign carmaker has ever managed to compete here, and that is no accident: the accumulated know-how required to build a good kei car functions as an invisible non-tariff barrier, one that owes nothing to any explicit rule against imports. Tax breaks keep prices low, and kei cars remain the biggest-selling category in Japan’s new-car market by far. A combined ranking of kei cars and ordinary registered cars for June 2026 shows just how dominant they are.

BYD is the first foreign brand to seriously enter this segment. Whether RACCO actually sells is almost beside the point—the entry itself is the story, and it’s why Japan’s car industry has grown so touchy about BYD.

Will BYD actually sell?

It would be a mistake to underrate the product. I’ve driven BYD’s cars myself: the ride feels European, and the infotainment often beats Japanese rivals. Given the price and the performance on offer, it’s easy to see why sales are climbing in Europe.

Japan has a variable that never shows up on a spec sheet, though: pride, mixed with a vague unease. As long as hybrids keep selling well, few buyers have much reason to switch to a Chinese EV. BYD’s Japanese sales for all of 2025 came to roughly 3,700 units—fewer than the N-Box sells in half a month. At a similar price, buying a well-made domestic kei car or compact still looks like the sensible choice to most Japanese consumers.

Subsidies as a hidden trade barrier

BYD’s problems are made worse by a change to Japan’s Clean Energy Vehicle (CEV) subsidy, effective April 2026. The old formula rewarded range and efficiency. The new one puts far more weight on “supply stability and cyber-security”—now worth 100 of the scheme’s 200 points—rewarding carmakers for securing battery materials and building charging infrastructure, not just for making a good car. In effect, the subsidy now measures how much a firm contributes to Japan Inc., not how good its vehicle is.

The results have split sharply by brand.

BYD wasn’t singled out model by model. Its entire line-up was cut, uniformly, from ¥350,000 to ¥150,000—a demotion for the whole brand. The politics behind this are hard to miss, including the backdrop of Japan-US tariff talks. Whether that’s fair is a separate question; either way, it’s a fact BYD has to live with.

The kei-EV category that RACCO belongs to is no kinder. Nissan’s and Honda’s kei EVs get ¥580,000, Mitsubishi’s ¥570,000, Suzuki’s ¥560,000, and Daihatsu’s ¥350,000. RACCO is expected to get about ¥150,000—the same as BYD’s regular EVs. That’s a gap of up to ¥400,000 versus domestic rivals.

Japan hasn’t gone cold on EVs

One clarification is worth making here, so the argument above isn’t misread as “EVs don’t sell in Japan.” They do—more and more. In June 2026, Tesla rose to second place among imported brands by monthly registrations, with 3,997 units. No dedicated EV maker had ever reached that spot before. Among domestic brands, Toyota’s bZ4X, recently updated with longer range, sold 10,710 units in fiscal 2025—nearly fifteen times the year before—and has led domestic EV sales for four straight months.

Something similar is happening in small cars. Honda’s new Super-ONE is, strictly speaking, not a kei car at all: at 3,580mm long and 1,575mm wide, it’s slightly bigger than the kei limit and registered as a compact instead. But add the ¥1.3m national subsidy to Tokyo’s own top-up (up to ¥600,000), and its ¥3.39m sticker price drops to roughly ¥1.49m—cheap enough that even Honda has been surprised by demand.

Japanese consumers, in other words, aren’t rejecting EVs as such. When the numbers work, they buy them. Domestic and American brands are riding that wave. BYD is the one being left out, held back by a subsidy gap that has nothing to do with how good its cars are. That, more than lingering distrust of China, is BYD’s real problem.

A marketing misfire

BYD is not blind to the trust problem. It has been pouring money into its dealer network, aiming for 100 authorised showrooms nationwide—each said to cost several hundred million yen to build—and had roughly 68 open by late 2025. That is a serious, capital-intensive bet on being seen as a long-term, reliable presence rather than a fly-by-night importer.

All of which makes the advertising harder to understand. Hiring famous actors and building a cute, very Japanese mascot follows the domestic industry’s old playbook closely. It says almost nothing about specifications, and nothing about the economics that actually work in BYD’s favour.

Copying an approach that Japanese manufacturers have used for decades doesn’t help a new, Chinese, electric brand—kei buyers don’t respond to it, and they probably don’t even understand what it’s meant to say. Distrust of a Chinese badge can only be undone through trust: proven build quality, reliable after-sales service, that kind of thing. Assuming a celebrity and a mascot can do that job is a misjudgement. Whatever money goes into TV ads might be better spent on government relations—quietly lobbying on the subsidy rules that are BYD’s biggest obstacle right now. In the long run, that’s probably the smarter use of the budget.

Japan is the most complicated auto market

Put it all together, and BYD’s road to quick success in this insular, manufacturer-dominated market still looks steep. On product alone, BYD is competitive in almost every segment it enters. But overcoming a general wariness toward Chinese brands takes more than a good product—it takes discounts, free charging, and other sweeteners. The new subsidy rules have just made that harder to afford.

Still, as Japan’s electrification rate rises and EVs become an ordinary choice, BYD has a real shot at becoming the third option, after domestic and American brands. Whether that happens comes down to one thing: can BYD get across, to a Japanese buyer, the one message that’s genuinely its own—cutting-edge, but still within reach.

Ken Maeda Bringing the inside view on EV & mobility across Japan and the world. Former Tesla Japan and Porsche Japan marketing executive. Founder, Undertones Consulting. International Speaker & Author.

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The reaction inside Japan was, by and large, positive. It was also entirely predictable — and that predictability is itself part of the story. “A wise decision.” “Hybrids remain unmatched.” “Sound crisis management.” And in one narrow sense, the praise is deserved. Toyota watched Honda commit to an ambitious EV programme, only to cancel it mid-execution — booking its first net loss since listing and compensating suppliers for costs already incurred. Its joint venture with Sony, Sony Honda Mobility, cancelled the AFEELA just months before its planned launch. It learned from that pain. The LF-ZC cancellation was, in that context, a rational act of self-preservation.

But rational decisions can lead to irrational destinations.

I. The Decision

The LF-ZC was not a speculative prototype. Three years ago, I saw it as a symbol of what Lexus’s electric future could look like. That makes its cancellation harder to dismiss. By the time it was cancelled, Toyota’s engineers had delivered. Gigacasting technology — the large-scale single-piece casting that Tesla pioneered and that dramatically reduces manufacturing complexity — had been developed and validated. A new-generation electronic platform was ready. Lightweight structural innovations had been proven. Arene OS, Toyota’s software operating system, is already being deployed on the 2026 RAV4.

Toyota’s own leadership has been explicit about this. Executive Vice President Hiroki Nakajima stated that the technologies developed through the LF-ZC programme — Gigacasting, the new electronic platform, lightweight structures — were “already complete.” The project was not cancelled because the engineering failed. It was cancelled because the investment required to manufacture it at scale exceeded what the market, at this moment, could justify.

The technology existed. The decision to cancel was not about capability. It was about the scale of investment required to bring a flagship EV to market — and a judgement that the market did not yet justify the cost.

“The market isn’t ready” has become the automotive industry’s favourite explanation for standing still — and in this case, it probably happened to be true.

That judgement is understandable. But it is also, quietly, alarming.

II. The Cost of Not Shipping

There is a principle in software development: you do not learn how to build something by studying it. You learn by shipping it. The same logic applies, with greater force, to electric vehicles.

Tesla did not become cost-competitive by perfecting its technology behind closed doors. It became cost-competitive by building hundreds of thousands of cars, failing publicly — the Model 3 production hell of 2018 was watched by the entire industry — iterating quickly, and driving down the cost curve through sheer volume. BYD followed a similar path — and went further. Today, BYD self-produces approximately 75 percent of its vehicle components: battery cells, motors, semiconductors. Its vertical integration is not a manufacturing philosophy. It is a structural advantage in both cost and speed that compounds with every vehicle produced.

Toyota’s approach is, as everyone in the industry already knows, the inverse. Its legendary supply chain — the network of specialist suppliers and the discipline of kaizen — was built for a world where the engine was the product. In that world, horizontal specialisation made sense. Each supplier refined its component to perfection. Toyota integrated them with unmatched skill.

In the EV world, the product is no longer just the car. It is the battery, the software, the autonomous capability, and the charging experience. And these are what BYD and Tesla make themselves.

Toyota has understood this intellectually for years. The LF-ZC was, in part, an attempt to change it — to introduce Gigacasting, to simplify the architecture, to reduce the component count. But without shipping the car, the learning does not accumulate. The cost curve does not move. And the gap between Toyota’s manufacturing economics and those of BYD and Tesla — particularly in what the car is now being redefined to be — widens with every quarter.

The competitive gap is no longer measured only in cost per vehicle. It is increasingly measured in the speed at which a company can collect driving data, improve its software, and deploy new capabilities over the air. In this dimension, Toyota — and Japanese automakers more broadly — remain at a structural disadvantage.

III. One Last Card to Play

Toyota’s answer to this gap has a name: solid-state batteries.

The technology is real. Toyota holds more solid-state battery patents than any other manufacturer in the world. The potential advantages — higher energy density, faster charging, improved safety — are genuine. If solid-state batteries reach mass production at competitive cost, they could reshape the competitive landscape in ways that favour Toyota’s strengths.

There are two problems with this wager.

The first is the timeline. Toyota has been describing solid-state batteries as “five years away” for more than a decade. Each announcement has been met with qualified optimism and followed by a revised schedule. And yet, remarkably, many in Japan’s automotive industry still believe — with genuine conviction — that it is coming.

The second is more fundamental — and, I would argue, more consequential. The competitive landscape has shifted beneath the assumption itself. When Toyota began betting on solid-state batteries, range anxiety was the primary barrier to EV adoption. Solve the battery, the logic went, and you win the market. But the definition of what a competitive car must be has moved on. Today’s consumer — and tomorrow’s — expects not just range, but autonomous capability, over-the-air software updates, and a seamlessly integrated digital experience. At the same time, conventional lithium-ion battery prices have fallen dramatically, narrowing the advantage that solid-state was supposed to deliver.

Toyota’s strategy, at its core, is a wager: that a generational leap in battery technology arrives at the right moment — and that the moment still matters as much as it once did. Industries rarely reward that kind of patience. Markets move before the leap does.

Toyota is not a company without options. Its resources, its engineering talent, and its global scale are real. But there is a structural pattern in industrial history — of incumbents waiting for the technology that vindicates their patience — that is uncomfortable to ignore.

IV. The Destination

There is a version of the Toyota story that ends well. Solid-state batteries arrive. The manufacturing cost of EVs falls dramatically. Toyota’s patience is vindicated, its capital preserved, its brand intact. It enters the mass EV market late but with superior technology, and its legendary production discipline scales the advantage rapidly. It is not an implausible scenario.

There is another version. The solid-state timeline slips again. Tesla and BYD continue to accumulate manufacturing experience, drive down costs, and expand their software and autonomy capabilities. The total cost of EV ownership reaches parity with hybrids in the United States — Toyota’s last reliable profit fortress — earlier than expected. By the time Toyota is ready to compete in full, the market has moved on.

I write this not as a critic of Toyota, but as someone who has watched this industry from the inside. Toyota has made reasonable decisions at every turn. The LF-ZC cancellation was defensible. The caution has been rational.

The risk of moving too fast is visible — Honda made it so. The risk of moving too slowly is quieter, but no less real.

Toyota has chosen the second path. Whether that proves to be strategy or miscalculation will depend on what comes next. Toyota’s leadership has stated that the technologies developed through the LF-ZC programme will be carried forward into future models. I choose to believe them. The question is whether those models arrive before the window closes.

Ken MaedaBringing the inside view on EV & mobility across Japan and the world. Former Tesla Japan and Porsche Japan marketing executive. Founder, Undertones Consulting. International Speaker & Author.

A Nissan Skyline GT-R R32 idles nearby. A group of men in their fifties stand around a Porsche 964, saying little, smiling at nothing in particular. Younger guys in hoodies circle a widebody S13 Silvia, phones raised. Everyone is here to see and to be seen — but with a respect that needs no words.

Back when I was at Porsche, Friday nights sometimes ended at Daikoku — friends gathered in Shibuya, then a convoy out along the Wangan, arriving sometime after midnight. Those drives taught me more about Japanese car culture and the uniqueness of this market than any market research ever could.

Daikoku is more than a car meet. Everyone here wishes this moment could last forever. And yet, Japan's auto industry is still searching for its answer to electrification. Standing here, I have come to believe the answer may lie somewhere unexpected — in JDM culture itself. A reminder of what Japanese industry is capable of.

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Born in the Bubble: From Imitation to Icon

Daikoku and the culture surrounding it did not emerge by accident. They are products of a very specific moment: Japan in the late 1980s and early 1990s, flush with capital, brimming with industrial confidence, convinced, with some justification, that it could build the best version of anything it attempted.

The benchmark, back then, was Germany. Porsche above all. But what began as imitation quickly became something else entirely — the follower mindset, taken to its extreme, produced a distinctly Japanese form of creativity. The 911 represented a particular idea of the performance car: heavy, refined, rear-engined, built for the grand touring road rather than the mountain pass. Japan’s answer was a different philosophy entirely. Lightweight. High-revving. Sharp to the point of aggression. Obsessively tunable.

The GT-R, the Supra, the RX-7, the NSX, the Civic Type R — these were not imitations of anything European. They were arguments. Japan was saying: here is another way to think about what a performance car can be. Accessible enough that a young engineer could own one. Robust enough that the aftermarket could transform it into something extraordinary. And fast enough, on the right road, to embarrass almost anything on the planet.

The same pattern repeated itself beyond cars. The Contax T2 and the Minolta TC-1 — compact high-end film cameras born in the bubble years, engineered to a standard that seemed almost irrational for their category — are now commanding serious premiums on the secondhand market worldwide. Just as Japan answered Porsche with the GT-R, it answered Leica with something distinctly its own.

Craftsmanship and a Nation’s Love for Cars

JDM is not simply a category of cars. It is an expression of what Japanese manufacturing does at its best — and of a culture that genuinely loves the result.

The JDM enthusiast who spends a weekend hunting for a specific intake manifold for a twenty-year-old engine is driven by the same obsession that built the car on the factory floor. The engineer and the enthusiast are, at heart, the same person. This is Japanese DNA.

It extends beyond manufacturing. Classic Porsches maintained in Japan are among the best-preserved examples anywhere in the world — collectors from Europe and the United States have long known that a Japanese-market 911 is likely to be in a condition that would be almost impossible to find at home. The same hands that modify, the same hands that restore. Daikoku is where this culture gathers — not to perform, but to share. What foreign visitors come to see when they make the trip is proof that a culture of genuine passion, rooted in the quality of what was made, can survive the decades.

There is also something more than sentiment at stake here. Because embedded in this culture — in the philosophy that produced the GT-R and the Supra and the RX-7 — is a hint of how Japanese OEMs might yet find their footing in the electric era.

JDM Holds Japan’s Answer to the Electric Age

The GT-R was not a nostalgia project. Neither was the Supra. They were forward-looking expressions of industrial ambition. That same instinct is precisely what the EV transition demands. The direction of travel is no longer in question — the world is accelerating toward electrification, and the future of both mobility and autonomy is becoming clear. Clinging to the internal combustion engine at this point is not a strategy; it is a delay. The knowledge, the craftsmanship, the engineering obsession that built the GT-R — all of it can be redirected. The task now is to build a new JDM for the electric age.

The JDM philosophy does not have to die with the combustion engine. Compact, fun to drive, and built with the reliability that Japanese manufacturing has delivered for generations — that is precisely the kind of EV the world is still waiting for. Battery weight is a real constraint, but it is an engineering problem, and Japan has historically been very good at engineering problems. The question is whether the industry can summon the will to make that leap.

Not a follower of Tesla's interface language. Not a rebadged Chinese platform. Not a European luxury brand where prestige comes first. Something that emerges from the same spirit that filled Daikoku on a Saturday night in 1993: here is another way to think about this.

Ken Maeda
Bringing the inside view on EV & mobility across Japan and the world. Former Tesla Japan and Porsche Japan marketing executive. Founder, Undertones Consulting. International Speaker & Author. Views from the Rising Sun publishes at kenmaeda.substack.com.

“When will Japan’s solid-state battery arrive?”
“Why is anyone still betting on hydrogen for passenger cars?”

What these questions are really asking is this: why did the world’s most accomplished auto industry fail to define the next era of mobility before someone else did? The answer lies in both behavior and organizational structure. Japan is the world’s greatest follower. And following, by definition, means someone else leads.

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I. Japan Plays the Game Better Than Anyone

To understand what went wrong, you first have to appreciate what went right.

For most of the twentieth century, the rules of the automotive game were fixed: build a car that is reliable, fuel-efficient, and affordable. Under those conditions, Japan’s OEMs were almost impossible to beat. Through discipline, precision, and a relentless improvement philosophy, Japanese manufacturers built what became known as the Toyota Production System — and turned those principles into a global competitive weapon. By the 1980s, they were dismantling the American Big Three on their home turf — not through revolutionary technology, but through superior execution of a well-defined game.

It is worth noting the irony: Japan was once the disruptor. Fuel economy and build quality were, in the context of 1970s Detroit, a form of disruption. But Japan did not win by rewriting the rules. It won by playing the existing rules better than anyone else on earth.

No example illustrates this more clearly than the kei car — Japan’s microcar segment, defined by strict government regulations on dimensions and engine displacement. Within those fixed rules, Japanese engineers have spent decades pushing fuel economy, safety ratings, and interior space to levels that seem physically impossible given the packaging. In 2025, kei cars accounted for approximately 36 percent of all new car sales in Japan — a market so refined, so optimised, and so specifically Japanese that no foreign automaker has ever meaningfully penetrated it. It is a monument to what Japan does best: achieving remarkable things within a defined box.

II. The Nature of the Greatest Follower

The problem is what happens when the box disappears.

The market became fundamentally uncertain — driven by the volatility of decarbonisation policy itself, the rise of new players unconstrained by legacy assets, and shifting trade and geopolitical dynamics. These forces did not simply change the rules of the automotive game. They dissolved them. Suddenly, the game was no longer about optimising a known system — it was about defining an unknown one. And that is where Japan's greatest strength became its most significant liability.

Japan’s auto industry did not fail to see the EV transition coming. Senior executives at Toyota and Honda were aware of Tesla’s rise, of China’s industrial policy, of the European regulatory trajectory. What they could not do — what the organisational culture made structurally difficult — was act as the architects of a new order rather than the refiners of an existing one.

This is the nature of the world’s greatest follower. Japan’s industrial DNA is optimised for a world where the destination is known and the path is defined. The task is to get there faster, more precisely, and more efficiently than anyone else. But when the destination itself is unknown — when the question is not “how do we build a better combustion engine?” but “what does mobility look like in 2035?” — that DNA becomes a constraint.

III. Two Roots of the Follower Culture

Education — and the Art of the Defined Form

Japan’s educational system is among the most rigorous in the world — and among the least conducive to original thinking. From kindergarten through university, students are trained to absorb information, recall it accurately, and apply it to pre-defined problems. The ability to question the problem itself is not cultivated. It is, in many contexts, actively discouraged.

This is not a modern phenomenon. It is encoded in Japanese culture at a level far deeper than schooling. Consider the haiku — perhaps the most Japanese of all art forms. Seventeen syllables, arranged in a precise 5-7-5 structure, capturing a single moment in nature. Within those constraints, Japanese poets have produced some of the most celebrated literature in human history. The discipline is not a limitation. It is the point. Mastery within a defined form is the highest virtue.

It is this same cultural logic — the mastery of defined forms — that produced the Prius, and built the kei car into one of the most sophisticated and impenetrable market segments in the world.

Japan did not invent the constraint. It perfected submission to it.

Organization — From Corporate Culture to Technology Obsession

The same dynamic plays out inside Japan’s large organisations. Individual employees are, by global standards, extraordinarily diligent and capable — but they require clear guidelines and direction to function at their best. Ask them to execute a defined task and they will outperform almost anyone. Ask them to imagine something entirely new — to think beyond their role, their department, or even their industry — and a different person emerges. Cautious. Hesitant. Waiting for instruction.

I saw this repeatedly in my own teams. Employees who were exceptional at execution would become almost unrecognisable when asked to think creatively about something new. It is also one of the most common concerns I hear from expatriate colleagues working inside Japanese organisations.

When I moved from a traditional automaker to Tesla, the contrast was immediate and disorienting. Tesla was not a car company that happened to use software. It was a software company that happened to make cars. The culture that produces that kind of radical reimagination — moving fast, embracing uncertainty, treating failure as data — is structurally difficult to replicate inside a Japanese organisation built on a different set of values.

This organizational logic extends into how Japan relates to technology itself. Rather than asking what the market needs today, Japanese industrial culture tends to assume that if something can be engineered to perfection, everything else will follow. The pursuit of a breakthrough — a new battery chemistry, a more efficient fuel cell — becomes a worthy end in itself. Whether it will become a viable business is rarely the first question — and in many organisations, asking it at all feels like a betrayal of engineering integrity.

This explains the hydrogen detour. Hydrogen fuel cells are an extraordinary engineering achievement. They also face fundamental infrastructure economics that make mass-market passenger car adoption implausible in any realistic near-term scenario. Every hydrogen station I pass in Japan is quiet. The technology exists. The ecosystem does not.

Full solid-state batteries follow a similar logic. The technology is real and potentially transformative. But committing strategic resources to a breakthrough that is “five years away” — as it has been for more than a decade — while the competition scales existing lithium-ion technology and builds software moats is not a strategy. It is a deferral.

IV. A Nation at a Crossroads

Here is the deepest irony. The follower culture that constrained Japan’s strategic imagination is the same culture that — given a clear destination — could still make Japan’s hardware transition a formidable force. The problem is that the destination now includes software, artificial intelligence, and the procurement of rare earth minerals. These are not domains where execution excellence alone is sufficient. They require a fundamentally different organisational logic — one that Japan has not yet built.

The talent is not the problem. The systems built to deploy it — corporate, educational, industrial — were designed for a different era.

The world’s greatest follower needs someone to follow. In EVs and autonomous driving, Tesla and BYD have set the course. Japan does not need to copy them — but it now knows where to go. The only remaining question is whether it can update its organisations, its mindset, and pivot to the mainstream in time — because the market is moving far faster than it ever has before.

Sources

CPCA; Automobility State of China’s Auto Market 2025; MarkLines. / Autovista24; SNE Research; ICCT Global EV Market Monitor H1 2025. / Japan Automobile Dealers Association (JADA) and All Japan Automotive Federation, 2025. / Gasgoo Global Industry Big Data. / Ohno, Taiichi. Toyota Production System. Productivity Press, 1988. / Christensen, Clayton M. The Innovator’s Dilemma. Harvard Business School Press, 1997.

Ken Maeda

Bringing the inside view on EV & mobility across Japan and the world. Former Tesla Japan and Porsche Japan marketing executive. Founder, Undertones Consulting. International Speaker & Author. Views from the Rising Sun publishes at kenmaeda.substack.com.

I spoke at two sessions: “Are We Facing Carmageddon?” on the first day, and “The Future of Electric Vehicles” on the second. The question I was asked most often was deceptively simple.

“Toyota, Honda, Nissan — three of the world’s largest automakers. So why is Japan’s BEV share barely 2 percent?”

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It is not a stumping question. It is, rather, a question that people living inside Japan have stopped asking — because the answer has become invisible through familiarity. In 2025, China's combined plug-in share — BEV and PHEV — reached 47.9 percent, just short of the half-way milestone. Europe's combined BEV and PHEV share reached approximately 26 percent. Norway closed the year at 97.5 percent — virtually every new car sold was a plug-in. Japan, meanwhile, saw its combined BEV and PHEV share hover at just over 2 percent throughout the year. This is not the story of a developing economy. It is the story of a country that built the modern automobile and is now watching the next one pass it by.

Two forces explain it. The first is structural: the Innovator’s Dilemma, playing out in textbook form. The second is cultural: a form of industrial pride so deep it has distorted the national narrative around EVs. Together, they have left Japan’s debate about its own automotive future several laps behind the rest of the world.

I. The Innovator’s Dilemma

Clayton Christensen’s framework is so well known it risks becoming a cliché. But clichés endure because they describe real patterns — and few industries illustrate the pattern more precisely than Japan’s auto sector today.

For most of the twentieth century, the competitive game in automobiles was defined by a single question: how efficiently can you burn petrol? Japanese OEMs answered that question better than anyone. Through patient engineering, meticulous supply-chain integration, and the manufacturing discipline that Taiichi Ohno built into the Toyota Production System, Japan came to dominate the global market on exactly those terms. The 1970s oil shocks accelerated the shift. By the 1980s, Japanese cars were dismantling the American Big Three on their home turf — a disruption enabled by fuel economy and reliability at a price point Detroit could not match.

That is the irony now crystallising in Tokyo boardrooms. The disruptors have become the disrupted.

Decarbonisation and autonomy have rewritten the rules. The new game is not about combustion efficiency; it is about battery chemistry, mineral supply chains, semiconductor design, and — above all — software. Tesla understood this first. Chinese manufacturers understood it second. Japan’s OEMs, whose entire organisational DNA is optimised for a different contest, are discovering that excellence in the old game provides little advantage in the new one.

The structural problem runs deeper than technology. Toyota alone sits at the apex of a supplier ecosystem employing hundreds of thousands of workers across Japan. Every tier of that ecosystem — the precision casting shops, the transmission specialists, the exhaust-system manufacturers — exists because of the internal combustion engine. Pivoting to EVs does not merely mean redesigning a car. It means dismantling and rebuilding a national industrial infrastructure, at the cost of livelihoods and decades of accumulated expertise.

This is the dilemma in its classic form: the more successful the incumbent, the more rational it is to delay the transition. The profits generated by refined hybrids and petrol vehicles fund the company today. Destroying that business model before a credible EV alternative is ready seems reckless. And so the transition proceeds slowly — rationally, by the logic of a quarterly earnings cycle; dangerously, by the logic of a decade-long technology shift.

The Innovator’s Dilemma applied to Japan’s auto industry

Adapted from Christensen, C. (1997). The Innovator’s Dilemma. Harvard Business School Press. Applied to Japan’s automotive sector by the author.

II. The National Pride Problem

The structural explanation is necessary but not sufficient. Many industries have faced the Innovator’s Dilemma and navigated it — slowly, painfully, but successfully. What makes Japan’s situation distinctive is a second force: the role of national identity in shaping how the country interprets, and largely resists, the EV transition.

The automobile is not simply a product in Japan. It is the centrepiece of the country’s postwar economic identity. At a time when semiconductors, consumer electronics, and mobile technology have all been ceded to foreign competitors, the car — and specifically the Toyota-led ecosystem — remains the one domain where Japan still commands global respect. That psychological weight makes honest assessment of the industry’s trajectory extraordinarily difficult.

The narrative that has taken hold runs roughly as follows. Hybrid technology — developed by Toyota, refined over three decades — represents Japanese ingenuity at its peak. The electric vehicle, by contrast, is a technology defined by Tesla and perfected by Chinese manufacturers: foreign soil, foreign rules. Accepting the EV as the future means conceding that Japan’s defining industrial achievement is being overtaken on terms it did not set.

This narrative has been actively reinforced. For years, major domestic OEMs communicated — explicitly and implicitly — that battery electric vehicles were not genuinely clean when assessed on a well-to-wheel basis, that charging infrastructure was insufficient, that range anxiety was a permanent condition rather than a solvable engineering problem. Some of these concerns were legitimate at the time. Many were exaggerated. But the cumulative effect was to build a public disposition toward scepticism about EVs that now operates independently of the underlying facts.

When Volkswagen, Audi, and Porsche accelerated into electrification and subsequently encountered serious financial difficulty, the Japanese industry interpreted this not as a warning about the pace of transition but as vindication of caution. The lesson drawn was: “we were right to wait.” The more defensible reading — that the European OEMs moved boldly if imperfectly, while Japanese OEMs are deferring a reckoning that is coming regardless — was largely absent from the domestic conversation.

III. The Last Fortress

On the second day of the summit, the session “The Future of Electric Vehicles” turned to a question that feels urgent in every mature auto market: can an EV be emotionally compelling? Can it make someone feel something beyond the satisfaction of a low electricity bill?

This should be Japan’s strongest territory. The country that gave the world the Lexus LFA, the Nissan GT-R, the Honda NSX understands viscerally how engineering becomes desire. But at the moment, that creative instinct is being deployed in the service of extending the internal combustion engine’s commercial life — refining hybrids to ever-higher levels of sophistication rather than channelling the same energy into building an EV that people want to love.

The reckoning is approaching regardless. The American market, where Japanese hybrids have maintained a significant share, is not insulated from the structural forces reshaping the global industry. In China — once Japan’s fastest-growing export market — domestic BEV manufacturers now dominate. Across Southeast Asia, the pattern is repeating. Walking through Oslo in May, the Chinese brands on the street were not fringe products. They were mainstream.

There is one piece of evidence that should matter to strategists in Tokyo. Despite everything, Japan’s brand capital in Europe remains intact. In the first quarter of 2026, the Toyota bZ4X ranked third among Norway’s best-selling BEVs — behind only Tesla’s Model Y and Model 3. Decades of reliability and quality have created a reservoir of consumer trust that has not yet been depleted. That trust is an asset. But it is not permanent, and it is not transferable to products that do not exist.

The competitive challenge ahead is not only about building a credible BEV. It is about software-defined vehicles — the shift, which Tesla pioneered, from competing on hardware specifications to competing on the speed at which software improves a car after it leaves the factory. That is a fundamentally different organisational capability from anything that made Japan’s auto industry great. Building it requires not just investment but a willingness to acknowledge that the old playbook is insufficient.

I have spent more than twenty years inside this industry, at companies that represent both the old model and the disruptive one. The situation is genuinely precarious. The window in which Japanese OEMs can reposition without catastrophic loss of market share is narrowing, not widening. What Nordic EV Summit made vivid — in a way that is harder to feel from inside Japan — is how much urgency the rest of the world has already internalised, and how little of it has crossed the Pacific.

The question asked in Oslo was not a hard one. The hard part is being willing, inside Japan, to take the answer seriously.

Sources

Norwegian Road Federation (OFV), full-year 2025 registration data. / European Automobile Manufacturers’ Association (ACEA), 2025 BEV share. / China Association of Automobile Manufacturers (CAAM), 2025 NEV data. / Japan Automobile Dealers Association (JADA) and All Japan Automotive Federation, 2025. / Christensen, Clayton M. The Innovator’s Dilemma. Harvard Business School Press, 1997. / Focus2Move, Norway top-selling models, 2026 YTD.

Ken Maeda

Bringing the inside view on EV & mobility across Japan and the world. Former Tesla Japan and Porsche Japan marketing executive. Founder, Undertones Consulting. International Speaker & Author. View from Rising Sun publishes at kenmaeda.substack.com.