Japan Plans Phase-Out of New Gasoline Cars by Mid-2030s

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All new vehicles sold in Japan by the mid-2030s will be hybrid or electric as the government begins to unveil concrete steps for reaching its goal of becoming carbon neutral by 2050, broadcaster NHK said.

Japan’s economy ministry is targeting “100% electrification” over approximately 15 years, a move that would gradually bump gasoline-engine cars out of the new car market, NHK reported, citing unidentified sources.

A new vehicle market consisting of only hybrid and electric automobiles would be a significant shift, given they only make up about 29% of Japan’s 5.2 million new motor vehicle registrations, according to Japan’s Automobile Manufacturers Association. While Toyota Motor Corp. popularized hybrid vehicles with the Prius and the country’s automakers are among the world’s top producers in the segment, the domestic market for electrified vehicles has plateaued in recent years. Last year, both plug-in hybrid and EV registrations fell year-on-year, JAMA data show.

“If this is indeed a Japan-wide decision and it really happens, it will definitely provide a new demand stream for power and it will be good news for utilities,” said Daine Loh, a power and renewables analyst at Fitch Solutions. On balance however, it’s “unlikely to see electricity consumption rise in the mid-2030s given low real GDP growth rates and an aging population,” Loh said.

With its latest plan, Japan joins a slew of other countries seeking to reduce their carbon emissions by moving away from gasoline vehicles over the coming decades. The U.K. said last month it would end the sale of new cars that run only on fossil fuels by 2030. France has also pledged to take new gasoline and diesel-powered vehicles off the market by 2040.

Hybrids Question

Prime Minister Yoshihide Suga unveiled an ambitious goal to decarbonize Japan in his first policy speech to parliament in October, but few details were provided on how the country will achieve the target. Japan’s carbon emissions have been on a downward trend, but they need to fall faster to meet the 2050 goal, according to an analysis from Bloomberg New Energy Finance.

Hiroki Aoki, director of the economy ministry’s automotive strategy planning office, said the ministry has not officially released its target relating to Japan’s future new car market. The ministry is still in the planning phase and is aiming to announce an official target by the end of the year.

If the government moves forward with its mid-2030s target, “pure gasoline vehicles will likely disappear from Japanese roads by 2050,” said Satoru Yoshida, a commodities analyst at Rakuten Securities Inc. This would lead to further declines in Japan’s gasoline demand, though the extent of that decrease depends on how many hybrid cars, which run partially on gasoline, will be allowed under the new ruling, he added.

The government will likely seek to keep hybrid vehicles on the road considering a complete halt in production of gasoline engines would negatively affect small factories and parts-suppliers, Yoshida said. “As long as hybrid vehicles survive, we will have some gasoline demand,” he said.

China, France

Elsewhere in Asia, China is poised to give fossil-fuel powered cars more time to co-exist with electric vehicles. The head of a panel advising the government on the matter said in September that the country shouldn’t set a firm timeline for phasing out of cars that run on fossil fuels. The panel proposed a new-energy vehicle target of 15% to 25% for 2025, with this figure rising to 50% to 60% for 2035.

About 3.8 million electric vehicles were on the road in China at the end of 2019, and that’s expected to grow to 80 million by 2030. The number of hydrogen cars, meanwhile, is projected to hit 1 million by 2030 from about 6,000 at the end of last year.

Singapore plans to phase out fossil-fuel powered cars by 2040, following in the footsteps of European countries such as France and Norway.

©2020 Bloomberg L.P.

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