(General Motors Co., Ford Motor Co. and Hyundai Motor Co. have all retreated from Japan at one point or another after struggling to persuade car buyers to switch over from the country’s carmakers. BYD Co. is betting that it can be the first to break that pattern.
The world’s largest maker of electric vehicles recently unveiled the Racco, a kei EV designed specifically for Japan’s narrow roads. It attracted more than 1,000 orders in the first few weeks, according to BYD. What sets the Racco apart from the company’s five other models in Japan is that it represents something other auto titans never dared to do: target the kei car category, the most popular and uniquely Japanese segment of the market.
Though the odds are stacked against BYD in Japan, the new effort reflects the ambition behind founder Wang Chuanfu’s declaration that the Chinese carmaker could become the world’s No. 1 automaker within five years. It’s also throwing down a challenge on the home turf of Toyota Motor Corp., which currently holds that title and sells more than twice as many vehicles as BYD globally.
The push into such a challenging market “enhances brand recognition and reputation globally,” said Yale Zhang, founder of consulting and research firm AutoForesight. “It’s tougher in some markets like Japan and Korea, but consumers worldwide ultimately value the same things: value for money and solid product performance.”
BYD’s boxy vehicle, which debuted in late July and whose name means “sea otter” in Japanese, is going up against Honda Motor Co., Nissan Motor Co. and others that are stepping up their own EV offerings, taking advantage of government subsidies that give them a potentially significant price advantage. Even so, BYD is betting that the speed and manufacturing efficiency driving its global expansion can crack one of the world’s most entrenched auto markets.
“Framing Japan as a marginal opportunity misreads the scale of the segment BYD is targeting,” Satoru Aoyama, an analyst at Fitch Ratings, wrote in a report. BYD’s efforts “reflect a long-horizon brand-building strategy more than a near-term volume play.”
More than 1.6 million kei cars and trucks were sold in Japan last year, accounting for more than a third of all new vehicle sales, with Honda, Suzuki Motor Corp. and Daihatsu Motor Co. dominating the segment with a combined market share of about 80%. Deliveries rose 7% in 2025, twice the pace of the broader market, providing at least one reason why BYD sees an opening.
Standing in the way of BYD are obstacles that include protectionist policies, not unlike those that US automakers faced a generation ago with quibbles over taillight colors and other regulatory hurdles. The Racco’s sticker price is ¥2 million ($12,600), after ¥150,000 in government incentives. But a policy change earlier this year substantially increased subsidies for Japanese, European and American models, while reducing them for BYD, in some cases by more than half.
Tokyo residents looking to buy Japanese alternatives — including Honda’s N-ONE e or Nissan’s Sakura — can tap into more than ¥550,000 in financial support, bringing their effective price tags down to as low as ¥1.2 million.
The disparity is threatening to erode BYD’s already slim margins, according to a BloombergNEF report. “Affordability is the No. 1 factor preventing people from buying an EV,” said BNEF analyst Taishin Noble.
Besides price, Japanese drivers have long preferred domestic cars, as well as hybrids for their range and reliability. The country has also been slow to build out a network of fast-charging stations, leading to range anxiety for would-be EV buyers.
BYD also plans to expand its lineup in Japan with the addition of two hybrids. It has built 77 sales locations, including 56 official dealerships. Even so, BYD remains a tiny player in Japan, having sold only about 7,400 passenger cars there since entering the market in 2023 — a fraction of what Toyota sells domestically in a single month.
BYD is aiming much higher, with the goal of amassing 10 times the Racco’s initial batch of orders, according to Japan President Liu Xueliang.
“There’s no shortcut,” Liu told reporters in July. “These 10,000 cars aren’t just important for BYD; they’re important for the popularization of EVs in Japan.”
Indeed, electrification may be providing a wedge for BYD that other foreign carmakers in Japan never had. GM gave up on selling cars in Japan in 2003 after it failed to attract buyers. Ford completely withdrew in 2016, citing low market share and weak profits. Hyundai exited in 2009 after selling only 15,000 cars, but reentered in 2022 with a focus on EVs.
BYD’s edge in EV technology appears to be catching on with some local drivers: it sold 3,742 battery-powered cars in Japan last year, compared with Toyota’s 4,227. Broader demand for EVs appears to be building: Toyota’s bZ4X has posted strong gains, while Honda stopped taking orders for its new kei EV after more than 12,000 customers rushed to buy one.
BYD’s modest inroads may also open the door for other Chinese automakers willing to test themselves in Japan.
Zeekr, the premium EV brand owned by Geely Automobile Holdings Ltd., showed off its 009 electric minivan at the Japan Mobility Show in late 2025. The ¥13 million model, due to go on sale through a local retailer this summer, will take on popular luxury vans including Toyota’s Alphard and Vellfire, and Nissan’s Elgrand — many of which sell for roughly half the price.
Others are following with a more localized approach. EMTA, a joint venture backed by Chery Automobile Co. and Japanese retailer Autobacs Seven Co., plans to introduce four models by 2029, starting next year with a kei EV.
“Consumers will have more options and, in turn, that will push Japanese companies to react,” said Hikari Todoroki, principal auto consultant at KPMG. “The market won’t expand and the business won’t thrive unless someone takes risks.”
Takahashi writes for Bloomberg.
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