FRANKFURT, Germany/TOKYO -- The electric car represents a breakthrough both in combating climate change and transforming industry through technology. But for Japan and Germany, whose economic success rests on gasoline- and diesel-powered cars, the disappearance of combustion engines comes with painful job cuts.
Japan wants all new cars to be electric vehicles by the mid-2030s, an ambitious goal for a country where purely gasoline powered cars account for about 60% of autos sold nationally. Over 30% are hybrids while pure EVs, plug-in hybrids and fuel-cell vehicles together account for only 1%.
As automobiles produce 16% of Japan's carbon dioxide emissions, the decarbonization of this industry is essential.
"We will strongly promote the introduction of EVs over the next 10 years," Japan's road map to cutting carbon emissions says. Widespread adoption will require more technological advances, such as reducing the cost of batteries to $100 per kilowatt hour or less by 2030, from around $150 per kwh now.
The shift away from gasoline-powered cars is taking root globally, with the Netherlands and the U.K. among the countries aiming to ban them outright by 2030. The trend has sparked a global race to develop EV technologies.
The electric vehicle revolution has given U.S. automaker Tesla a greater market capitalization than Toyota Motor while Chinese companies such as CATL have taken the lead in the market for batteries that power EVs.
"Japan just cannot stand idly by" as global rivals join the electric race, a Honda Motor executive said.
The sense of crisis has expanded to makes of commercial vehicles and minicars, both of which are difficult to electrify. "We can't fall any further behind," an executive at Isuzu Motors said.
But an industrial structure premised on producing conventional vehicles has been a driving force behind the Japanese economy, and its strength alone will make transformation difficult.
"I can't see this being achieved without groundbreaking technological innovation," said Toyota President Akio Toyoda, who chairs the Japan Automobile Manufacturers Association, referring to Japan's planned switch to electrified cars by 2030. "And we could risk losing our international competitiveness unless the whole supply chain tries to make the switch."
A government-affiliated think tank in Germany caused shock waves in January 2020 with what it called a worst-case scenario, saying the country could lose around 410,000 jobs in auto-related industries by 2030 due to auto electrification -- about half the current employment level of around 800,000.
In Japan, 910,000 people work in automotive industries, including 690,000 in parts-related fields. A gasoline-powered automobile is composed of around 30,000 parts, while an engine-less EV contains about half that number.
"Inquiries about selling businesses are on the rise from small and medium-sized companies making engine parts," a mergers and acquisitions specialist said.
Shigenobu Nagamori, chairman of Japanese motor manufacturer Nidec, predicts that the price of a car will fall 80% by 2030 once EVs make up half the market. One analyst calculates that Japan will lose up to 200,000 jobs if all cars become fully electric or powered by fuel cells.
Japan is spurring investment in next-generation fields like storage batteries in its quest to transform the nation's industrial structure, while attempting to create new employment opportunities in areas such as developing a charging infrastructure. Support also will be given to help small and midsized suppliers adapt and transform.
"We want to create a Japanese economy where there is a virtuous cycle between economy and the environment," said Hiroshi Kajiyama, the country's economy minister.