BYD is launching electric vehicle charging stations and enhancing its marketing efforts along with customer incentives in Japan, with the goal of increasing sales in a market that has posed challenges for the Chinese automaker's global growth.

Supported by Warren Buffett, BYD has emerged as China's leading EV manufacturer after experiencing rapid growth domestically. The company is now looking to expand internationally, including in Japan, which is one of the largest automotive markets globally.

However, Japan presents significant challenges for foreign car manufacturers. The demand for electric vehicles has historically been low, and this year, the government revised its EV subsidy calculations, resulting in reduced support for BYD and several competitors, raising concerns about potential protectionist measures.

To attract Japanese consumers, BYD is providing discounts on the first 1,000 units of its latest model and has launched television advertisements featuring a popular Japanese actress.

This approach has led to marketing expenses that have exceeded initial expectations. The international expansion of BYD is being closely monitored, especially given that the company's market value is nearly equivalent to that of GM and Ford combined.

Nevertheless, some Japanese consumers remain hesitant to purchase high-value products from China due to concerns about quality. The two largest economies in Asia also have a complex historical relationship and ongoing political tensions.

"The vehicles are impressive, but I doubt they will gain traction in Japan," remarked Yukihiro Obata, a 58-year-old who visited a BYD showroom in Yokohama with his son in July.

"Japanese consumers generally believe that domestically produced goods are superior to those from China and South Korea. It's hard for us to accept that Chinese products could be of higher quality," he added.

Obata mentioned that he is open to purchasing a foreign vehicle and is also considering electric options from brands like Mercedes-Benz, Audi, and Hyundai.

BYD, based in Shenzhen, inaugurated its first showroom in Japan in February of the previous year and has successfully sold over 2,500 vehicles to date.

In contrast, Toyota Motor reported sales of just over 4,200 battery electric vehicles (EVs) in Japan during the same timeframe, while nearly 17,000 Teslas were registered in the country by the end of March 2023, according to the latest available industry statistics.

BYD currently offers three models and operates more than 30 showrooms.

"There are individuals in Japan who have a strong aversion to Chinese products, so it is not advisable for us to impose ourselves on them," stated Atsuki Tofukuji, president of BYD Auto Japan.

Instead, he expressed a desire to attract customers through BYD's competitive pricing and performance.

GOVERNMENT SUBSIDIES

According to industry data, electric vehicles represented just over 1% of the 1.47 million passenger cars sold in Japan during the first seven months of this year, excluding the low-power "kei" mini cars designed for the domestic market.

The slow uptake of EVs in Japan can be attributed to Toyota and other local manufacturers prioritizing hybrid technology.

In April, the government revised its EV subsidy program, aiming to enhance the development of charging infrastructure.

The subsidies, which were previously based on vehicle performance, now consider factors such as the number of fast chargers a manufacturer has installed and the quality of after-sales service.

The subsidy for BYD's Atto 3 SUV, priced at 4.5 million yen ($30,996.00), was reduced nearly by half, from 650,000 yen to 350,000 yen.

Tofukuji noted that these subsidy reductions have negatively impacted sales during a company event in July.

In response, BYD introduced 0% financing options from April to June and offered cash incentives for home chargers in July and August. Additionally, the company plans to install fast chargers at 100 locations by the end of next year, a strategy that could help it secure larger subsidies, Tofukuji informed Reuters, revealing a previously undisclosed initiative.

To enhance its brand visibility, BYD has begun airing television commercials featuring Masami Nagasawa, a well-known Japanese actress and model.

This has contributed to an increase in customer acquisition, although the automaker has exceeded its initial marketing budget for Japan, according to Tofukuji, who refrained from disclosing the exact amount spent on marketing.

BYD's offerings in Japan feature the Seal sedan, priced at 5.28 million yen for the rear-wheel-drive variant, which is eligible for a subsidy of 450,000 yen. Additionally, the company markets the Dolphin, starting at 3.63 million yen, qualifying for a 350,000 yen subsidy.

'JAPANESE WAY'

The adjustment in subsidies may indicate a governmental effort to protect the domestic automotive sector, as noted by Zhou Jincheng, manager of China research at the auto research firm Fourin in Nagoya.

"They needed to implement measures to support their automotive industry," Zhou remarked.

An official from the industry ministry stated that the purpose of the change was to foster an environment where electric vehicles are utilized sustainably and promoted "in a Japanese way."

Other manufacturers affected by subsidy reductions include Mercedes, Volkswagen, Peugeot, Volvo, Hyundai, and the Japanese brand Subaru.

Nissan and Toyota SUVs continue to qualify for the maximum subsidy of 850,000 yen, while Tesla also benefits from equal or higher subsidies for its models sold in Japan.

Despite the overall low sales of electric vehicles, foreign automotive brands represented nearly 70% of sales during the first seven months of the year.

The reduced subsidy did not deter Kyosuke Yamazaki, a first-time car buyer in his early 30s, from purchasing a BYD Atto 3, even though he lost out on approximately $2,000 in savings by buying the vehicle after April. He expressed a preference for the longer driving range of these cars compared to their Japanese counterparts and had no reservations about purchasing from the Chinese manufacturer. 

"I used to work in Shanghai," he shared. "I am quite familiar with BYD."