(ECNS) - For decades, Japanese automakers set the global benchmark for quality and efficiency, but that edge is eroding amid the global shift to electrification and smart mobility. Chinese carmakers are now rising rapidly, increasingly shaping the direction of the global automotive industry.
Nikkei Asia reported that profits in Japan's auto industry could shrink sharply in fiscal year 2026 due to mounting pressures including tariffs, geopolitical conflicts, and supply chain risks.
High U.S. tariffs have squeezed profits, even after rates on Japanese vehicle exports were cut from 27.5% to 15% in late 2025.
Toyota's net profit fell 19.2% to 3.8 trillion yen ($25 billion) in 2025–26, including its first operating loss in North America since 2008.
Geopolitical tensions have added further strain, with rising oil prices and shipping risks around the Strait of Hormuz disrupting supply chains.
Toyota's global sales posted their third straight monthly decline, Bloomberg reported, with exports to the Middle East down more than 90%. Forbes said Toyota's regional sales fell 33.7% year-on-year in April to just over 31,000 units.
Japanese brands' market share in China fell from 23.1% in 2020 to 9.8% in 2025, while local new‑energy vehicles surged past 60% retail penetration in April 2026, according to the China Association of Automobile Manufacturers.
Traditional strengths such as fuel efficiency and durability no longer guarantee success in an era defined by electrification, intelligent cockpits, and autonomous driving.
Chinese automakers are also gaining ground in Southeast Asia. PwC reported that the Japanese market share in six major ASEAN countries dropped to 59% in early 2025. Nikkei noted BYD and other Chinese EV makers are expanding aggressively through discounts, regional assembly, and supply chain integration.
Globally, Japanese automakers' sales slipped to 25 million units in 2025, losing their long‑held top position for the first time since 2000. Chinese manufacturers recorded nearly 27 million units, rising to the top spot worldwide.
Japanese firms are now accelerating their transition. Nissan plans to launch 10 new‑energy models in China by 2027, Toyota has earmarked 1.6 trillion yen for R&D in autonomous driving and EVs, and Honda will invest 800 billion yen in future EV development.
Meanwhile, SAIC Motor became the first Chinese automaker last week to surpass 100 million vehicles in cumulative sales, delivering its milestone IM LS9 Hyper SUV in Shanghai. The achievement underscores how China's auto industry has evolved from follower to global driver of competition and technological change.
(By Gong Weiwei)
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