Japanese automakers are increasing sales of HEVs while lagging behind global peers in BEV sales. The automakers’ transition
strategy includes two phases, first from ICE vehicles to HEVs and then from HEVs to BEVs.
These companies have focused on HEVs over BEVs because they see greater demand for HEVs compared withBEVs. They previously deferred investments in BEVs as they assessed that demand was too low for them to reduce investments in HEVs in favour of BEVs. Japanese automakers are now accelerating investments in BEVs, having seen initial success with HEVs.
They have positioned hybrid electric vehicles (HEVs) as a transitional replacement for internal combustion engine (ICE) vehicles in the near term, and plan for battery EVs (BEVs) to replace HEVs only in the longer term.
Fitch Rating said it believes HEV growth will support the automakers’ profits and fund the transition to BEVs. Hybrid technology and production are now well established, and these products are almost as profitable as ICE vehicles for Japanese automakers.
Lag in BEVs a Long-Term Concern
The automakers plan to introduce mass-market BEVs in 2026-2028 and start mass production thereafter. They are increasingly investing in new technologies, such as new platforms dedicated to BEVs, all-solid-state batteries, advanced operating systems and autonomous driving.
However, these new technologies for BEVs are untested, resulting in the risk that any delay in the commercial implementation of the technology will affect the introduction of BEVs. Further delays could perpetuate the Japanese automakers’ lagging market position in the BEV market, particularly in comparison with Korean automakers.
Despite the lag, Fitch has a stable rating outlook on the sector with a low rating impact, it namely has a a Stable Rating Outlook on the three Japanese automakers, Toyota, Nissan and Honda. Their Outlooks it said reflect their improving earnings and margins while they maintain strong balance sheets and net cash positions adding that their financial strength will support increasing investments in the transition.
