In a significant shift in the global automotive industry, China has outpaced Japan to become the world’s largest vehicle exporter in 2023, according to data released by the Japan Automobile Manufacturers Association (JAMA).

The surge in China’s auto sector is largely attributed to its substantial investments in electric vehicles (EVs), a sector where Japanese companies have shown more restraint. As per the China Association of Automobile Manufacturers, China exported 4.91 million vehicles in 2023, compared to Japan’s 4.42 million. China’s customs bureau reported an even higher figure of 5.22 million, marking a remarkable 57% increase from the previous year. Notably, one-third of these were fully electric vehicles.

While China has been leading in monthly vehicle exports, the recent data confirms its dominance on an annual basis as well. In contrast, Japanese automakers, including Toyota, the world’s largest company by unit sales, have a significant production footprint in other countries. In 2022, Japan produced 7.84 million vehicles domestically, excluding motorcycles, while its overseas production reached nearly 17 million units.

Japanese manufacturers have traditionally focused on hybrid vehicles that combine battery power with internal combustion engines, such as the Toyota Prius. In 2022, only 1.7% of cars sold in Japan were electric, compared to approximately 15% in Western Europe, 5.3% in the United States, and nearly 20% in China.

However, Japanese automakers are gearing up to compete in the EV market. Toyota, for instance, plans to sell 1.5 million EVs annually by 2026 and 3.5 million by 2030. The company is also heavily investing in solid-state battery technology, which promises faster charging and greater range for electric cars.

Meanwhile, Chinese company BYD recently overtook Tesla as the top seller of all-electric vehicles, thanks to strong government support for the EV sector in China. However, this success has drawn scrutiny from Western regulators, who accuse Chinese firms of anti-competitive practices such as price dumping.

European Commission President Ursula von der Leyen announced an investigation into Chinese state subsidies for electric cars in September. The investigation could lead to the European Union imposing duties on Chinese cars sold at unfairly low prices, undercutting European competitors.

Reflecting on the situation, Christopher Richter, an auto analyst at CLSA, said, “It’s kind of reminiscent of what happened to Japan in the 1980s when they started exporting a lot of automotives. So the Japanese solved it by starting (to build) a lot of factories overseas… They build overseas four times more than what they export.”