Japanese Prime Minister Sanae Takaichi met with German Chancellor Friedrich Merz to request that Japanese electric vehicles be included in the European Union's (EU) subsidy program. This request comes as Germany and France have agreed to prioritize regionally produced vehicles, increasing the likelihood that Japanese electric cars will be excluded from subsidies. Merz is scheduled to visit South Korea on the 29th for a summit with President Lee Jae-myung, raising questions about whether this issue will be addressed.
According to the Yomiuri Shimbun on the 29th, the two leaders held talks at the Prime Minister's Office in Tokyo the previous day, announcing three joint documents aimed at enhancing cooperation in security, economic security, and advanced technology. The economic security declaration includes plans to strengthen supply chains for critical raw materials, such as rare earths, electric vehicles, and pharmaceuticals. They agreed to reduce dependence on specific countries, including China, through recycling and stockpiling cooperation. Merz expressed a positive stance on Japan's participation in the next-generation fighter jet (GCAP) jointly developed by Japan, the UK, and Italy. This marks Merz's first visit to Japan since taking office in May of last year.
During the meeting, Takaichi also raised concerns about the market access for Japanese electric vehicles in Europe. According to the Nihon Keizai Shimbun, she requested modifications to the EU's criteria for electric vehicle subsidies to include Japanese models. The draft of the Industrial Acceleration Law (IAA), announced by the EU Commission in March, stipulates that subsidies or public support for electric vehicles would require assembly and parts production within the region. Germany, along with France, has been a key player in defining the scope of 'regional' production.
On October 16, Germany and France agreed to include partner countries that participated in the EU single market as of January 1, 2020, under certain conditions, in the definition of 'regional' production. While the UK is expected to be included, Japan and South Korea have been excluded.
The Japanese automotive industry is particularly concerned about the corporate vehicle market, which accounts for about 60% of car sales in Europe. In Europe, it is common for companies to provide leased vehicles, known as 'company cars,' to employees as part of their compensation. This market, which benefits from tax incentives and purchase subsidies, is a major sales channel for Japanese manufacturers. If Japanese electric vehicles are excluded from the subsidy program, their price competitiveness could diminish, impacting sales.
Electric vehicles account for over 5% of Toyota's sales in Europe, with more than 50,000 units sold, including in the UK. While Toyota plans to produce electric vehicles at its Czech plant by 2028, it currently exports most of its electric vehicles to Europe from Japan. The Nikkei reported that over 90% of the European automotive market is expected to be electric vehicles by the 2030s. Although the current share of electric vehicle sales is small, exclusion from the subsidy program could hinder future expansion in the European market.
The Japanese industry emphasizes its established production and employment base in Europe. Japanese automakers began exporting to Europe in the 1960s and have since expanded their local production networks, creating approximately 170,000 jobs. Yoshihiro Nakata, CEO of Toyota Europe, stated, "Toyota is not a 'guest' in Europe; we are an important contributor to the European automotive industry."
However, Japan's prior efforts to persuade European leaders have not been reflected in the Germany-France agreement. Minister of Economy and Industry Ryosei Akazawa requested amendments to the legislation from EU Executive Vice President Stefan Sejourne in May. Prime Minister Takaichi also conveyed concerns about the exclusion of Japanese cars to EU Commission President Ursula von der Leyen during the G7 summit in June.
Despite these efforts, Japan was excluded from the recent Germany-France agreement, prompting Takaichi to request modifications from Chancellor Merz. The Nikkei noted that the relatively small sales volume of Japanese automakers in Europe, aside from Toyota, has made it difficult for the industry to present a united front.
To amend the legislation, France must also be persuaded. According to the Nikkei, France has been particularly insistent on prioritizing 'European-made' vehicles, as companies like Renault are more dependent on the domestic market than their German counterparts.
The EU Commission, European Parliament, and EU Council are set to begin discussions to finalize the legislation. Japan plans to intensify its efforts to persuade the governments of member states, including Germany and France, as well as EU parliamentarians. The Nikkei warned that if the exclusion of Japanese electric vehicles is confirmed, it could disrupt cooperation between Japan and the EU regarding supply chains.
Meanwhile, Chancellor Merz is expected to visit South Korea on the 29th for talks with President Lee Jae-myung. Given that South Korean electric vehicles are also excluded from the Germany-France agreement, it remains to be seen whether this issue will be discussed during the Korea-Germany summit.
* This article has been translated by AI.
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