[WORLD] Japanese carmakers are ramping up efforts to integrate advanced Chinese technologies into their electric vehicles (EVs), as they seek to recover lost market share in China, the world’s largest auto market. The announcements were made at the ongoing Auto Shanghai motor show, underscoring a strategic pivot to localize offerings amid intensifying competition from domestic Chinese brands.
Chinese EV giants such as BYD and NIO have gained substantial ground, thanks to cutting-edge battery innovations and digital features that resonate with local consumers. Once dominant for their fuel efficiency and reliability, Japanese automakers now find themselves trailing in software and connectivity—a space where Chinese firms have built a clear lead.
In a notable move, Toyota Motor Corp revealed that its upcoming bZ7 electric vehicle will run on Huawei’s HarmonyOS, a smart operating system praised for its integration across multiple devices. The collaboration signals Toyota’s intent to align with Chinese consumer preferences, where in-car connectivity and digital ecosystems increasingly outweigh traditional brand appeal.
Set to launch within the next year, the bZ7 reflects Toyota’s broader strategy to embed local insights into vehicle development. The company has also announced it will assign young Chinese engineers to lead model development for the domestic market.
“To deliver cars people want in China, we need Chinese brains and hands involved in development,” said Li Hui, general manager of Toyota China.
This shift mirrors similar strategies by global competitors like Volkswagen and General Motors, who are also empowering local teams to adapt quickly to China’s rapidly evolving automotive landscape. Key focus areas include autonomous driving and in-car entertainment—both top priorities for Chinese consumers.
Sales figures underscore the urgency. In 2024, Japanese automakers saw declining performance in China, with Toyota sales down 6.9%, Nissan down 12.2%, and Honda plunging 30.9% compared to the previous year. The Japan brands’ market share has dropped sharply from 24.1% in 2020 to 13.7% in 2024, according to the China Passenger Cars Association.
Delays in rolling out new energy vehicles (NEVs), including EVs and plug-in hybrids, have contributed to this slump, especially as Chinese companies have moved quickly to meet surging demand. Weakened consumer spending amid economic headwinds has also impacted overall sales.
Geopolitical tensions and a growing sense of economic nationalism have further tilted consumer sentiment in favor of homegrown brands, adding to the challenges facing Japanese firms. Analysts suggest that in order to regain traction, foreign carmakers must not only match Chinese rivals on technology, but also demonstrate cultural and strategic alignment with the local market.
Honda, for example, has partnered with Chinese AI startup DeepSeek to infuse artificial intelligence into future EV models. The company also unveiled plans to co-develop advanced driver assistance systems with another Chinese startup. These systems are being designed to navigate the dense urban traffic and limited parking common in China’s megacities—challenges that demand highly adaptive driving technologies.
Meanwhile, Nissan is strengthening its China R&D operations with a planned investment of 10 billion yuan by the end of 2026, signaling its long-term commitment to innovation tailored specifically for the Chinese market.
As the EV transition accelerates, Japanese automakers are betting that embracing Chinese talent and technology will be key to staying competitive in a market that increasingly sets the pace for global automotive trends.
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