China blowing past Japan on autos may trigger change

Khodrocar - If there’s any surprise over the fact that China dethroned Japan in 2023 to become the world’s top automaker it relates to how fast that happened.

Overall, auto exports jumped 58% last year from the prior one, topping 4.91 million units, says the China Association of Automobile Manufacturers. Along with deploying its increasing strength in electric vehicles, China Inc managed to tap Russia’s sanctions-hit market with unexpected aplomb. Detroit is not thrilled, of course.

 is how all this goes over in Japan, where, 12 years on, officials are still struggling to get their heads around China’s surpassing Japan in gross domestic product terms. That GDP changing of the guard happened, depending on your preferred data set, sometime between 2010 and 2012.

Since then, Japanese governments in succession have convinced themselves that GDP isn’t the key metric: It’s per capita income, in which Japan leads what’s now Asia’s biggest economy by nearly three times. Yet the blow to Japan’s collective psyche from losing the GDP crown was a devastating one.

Arguably, shock over trailing China helped Shinzo Abe retake the premiership in late 2012. Abe’s economic revival scheme wasn’t pitched as a beat-China strategy – but that’s precisely what his strategy to loosen labor markets, cut red tape, rekindle innovation, catalyze a startup boom and revive Tokyo’s role as Asia’s indispensable financial hub amounted to.

Years of Tokyo complacency since then have been good to China, enabling Xi Jinping’s economy to fill the void created by deflation-racked Japan. The 12 years since Abe’s Liberal Democratic Party returned to power have been a lost period for major economic retooling.

Efforts to produce more tech "unicorns,” for example, went particularly awry. Today, Japan is trailing Indonesia in the race to generate $1 billion-plus valuation startups.

The same muddle can be seen in Japan’s almost linear obsession with hybrid vehicles as the EV market shifts into overdrive.

True, officials at Toyota Motor and Japanese peers are realizing their mistakes in having dismissed the EV future that’s fast coming into view. Toyota is playing catchup with new models. Japan’s top automaker is tripling EV output as it chases China’s BYD, which recently surpassed Elon Musk’s Tesla.

The question, of course, is whether it may already be too late as Tesla, Detroit, Germany and China beat Toyota to the market. "No one,” says Michael Dunne, CEO of auto industry advisory ZoZoGo, "can match BYD on price. Period. Boardrooms in America, Europe, Korea and Japan are in a state of shock.”