Japan’s passenger EVs are turning Chinese.

On 21 October, Japan’s economy ministry announced the maximum EV subsidy from ¥1.3 million may fall to ¥780,000 in January 2027. With the government seeking savings to fund its planned food consumption tax cut, leaving future EV subsidies a likely target for cuts. This will push buyers to register cars in December, while the budget is still open, and demand will drop sharply once the year-end rush ends. We predict sales will fall at least 30% in January–March 2027, and Toyota faces the largest potential sales loss. Its redesigned bZ4X sold 14,448 units between April and September, helped by a ¥400,000 subsidy increase and shortages of Toyota hybrids. September sales reached 3,231 units, around 80 times their level a year earlier. So a 30% sales decline could cost Toyota roughly ¥4.7 billion (US$29 million) in monthly revenue. BYD stands to benefit as Toyota loses part of its subsidy advantage. BYD’s subsidy was already cut to ¥150,000 in April due to battery-sourcing rules. A reduction in the maximum subsidy would narrow Toyota’s advantage over BYD – losing out price sensitive buyers to BYD. As Tokyo searches for more savings for the food consumption cuts, BYD is positioned to increase market share.