Toyota announced that its new electric vehicle (EV), the “bZ7,” will use an operating system from Chinese technology giant Huawei. Toyota aims to launch the model within a year. In a bold move, the company will also appoint young Chinese engineers as chief developers for models targeting the Chinese 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.
Japanese automakers have struggled in China. In 2024, Toyota’s new car sales dropped by 6.9%. Nissan fell by 12.2%, and Honda plummeted by 30.9%. Their market share in China shrank sharply—from 24.1% in 2020 to just 13.7% in 2024, according to the China Passenger Cars Association.
One major reason is their slow entry into the new energy vehicle (NEV) sector. Chinese competitors like BYD and various startups moved quickly. Japanese models, in contrast, lacked innovation and failed to meet consumer expectations.
“It seems Japanese automakers are not really serious about NEVs. Their vehicles lack innovation,” said a 24-year-old man from Shanghai while viewing Japanese cars on display.
To win back Chinese consumers, Japanese companies are turning to Chinese technology. Toyota’s partnership with Huawei marks a big step. Honda is also following this strategy. It will use artificial intelligence from Chinese startup DeepSeek and codevelop driver assistance technologies with another Chinese firm. Honda hopes to create systems that can handle heavy traffic in major Chinese cities.
Nissan is making an even bigger bet on Chinese technology. It plans to invest 10 billion yuan (about ¥200 billion) in research and development in China by the end of 2026. “We redefined our strategy for the Chinese market where a major shift toward NEVs is taking place,” said Isao Sekiguchi, managing director at Dongfeng Nissan Passenger Vehicle Co.
Plug-in hybrid vehicles (PHVs) may be key to success. In 2024, PHV sales, including exports, rose by 83% to 5.14 million units, outpacing EV growth. EVs dominate cities, but in regional areas, PHVs are preferred for their longer range and flexibility.
Nissan plans to launch its first PHV pickup truck, the “Frontier Pro,” by the end of this year. Mazda will also offer its new “EZ-60” model in both EV and PHV versions.
“China is the world’s most advanced electrification and smartization market. It is important to focus on partnering with Chinese companies to respond to market demand,” said a senior official at a Japanese automaker.
As competition intensifies, embracing Chinese technology could be the decisive factor for Japanese automakers to survive and thrive.
