Japan to Phase Out Gasoline-Powered Cars, Bucking Toyota Chief

TOKYO—Japan said it planned to stop the sale of new gasoline-powered cars by the mid-2030s, bucking criticism by

Toyota Motor Corp.’s

chief that a rapid shift to electric vehicles could cripple the car industry.

The plan released Friday followed similar moves by the state of California and major European nations, but it has faced resistance from auto executives in a country that still makes millions of cars annually that run solely on gasoline engines.

Japan would still permit the sale of hybrid gas-electric cars after 2035 under the plan. Many models from Japan’s top car makers—Toyota,

Honda Motor Co.


Nissan Motor Co.

—come in both traditional and hybrid versions.

Earlier this month, Toyota President

Akio Toyoda

said that if Japan banned gasoline-powered cars and moved to electric vehicles too hastily, “the current business model of the car industry is going to collapse.” He was speaking on behalf of Japanese auto makers in his role as head of a local industry association.

Mr. Toyoda said the electricity grid couldn’t handle extra summer demand and observed that most of Japan’s electricity is generated by burning fossil fuels.

Government officials said car makers needed to revise their business models. Prime Minister

Yoshihide Suga

pointed to a different portion of Mr. Toyoda’s comments in which the Toyota chief said he backed the government’s goal of making Japan carbon-neutral by 2050. Reducing carbon emissions “should be tackled as a strategy for growth, not as a limitation on growth,” Mr. Suga said.

Japan’s move capped a year in which major economies around the world competed to outdo each other in setting targets for renewable energy and electric cars. That has added pressure on global auto makers to hasten their transition away from gasoline-powered vehicles, although for now many are getting their profits from U.S. consumers hungry for gasoline-powered trucks and sport-utility vehicles.

Earlier this month the European Union agreed to cut greenhouse-gas emissions by at least 55% of 1990 levels by 2030. In September,

California Gov. Gavin Newsom

moved to ban sales of new gasoline and diesel-powered passenger cars in the state by 2035.

Japanese officials said car makers must revise their business models to accelerate the shift away from gas-powered vehicles. Traffic in Tokyo in April.


kimimasa mayama/Shutterstock

That same month, Chinese leader Xi Jinping said in a video message at the United Nations that China would go carbon-neutral by 2060, meaning it would have net-zero emissions of carbon dioxide. Weeks later, Mr. Suga jumped ahead of Mr. Xi with a pledge to do the same a decade sooner, matching the EU’s target.

The Japanese government’s Christmas Day release, which also targets adding as much as 45 gigawatts of offshore wind-power capacity by 2040, calls for all new cars sold in the country from the mid-2030s onward to be electrified. That includes electric vehicles, hybrid gas-electric models and cars whose electricity is generated by hydrogen fuel cells. The plan says the cost of batteries should be reduced so that electric vehicles cost about the same as gasoline-powered vehicles a decade from now.

An outline of the plan released by the Ministry of Economy, Trade and Industry expressed concern that Europe and China were jumping ahead of Japan. It observed that sales of electric and plug-in hybrid vehicles more than tripled in the EU in the July-to-September quarter to around 270,000 units, while the equivalent figure for Japan was about 6,000.

Masayoshi Arai,

a ministry official, said “Japan is very far behind” on vehicle electrification.

Japanese auto executives bristle at such statements, saying more hybrid gas-electric vehicles are sold in Japan than in any other country. Some question whether fully electric vehicles such as those made by

Tesla Inc.

are more environmentally friendly than hybrids given the carbon dioxide emitted in producing EVs and their parts.

“It is absolutely not the case that Japan is behind,” said

Toshihiro Mibe,

a Honda executive who heads an industry council on environmental technology.

Toyota and Honda have yet to release specific plans for mass-market electric vehicles in the U.S. and Japan, putting them behind the likes of

Volkswagen AG

, which plans to invest around $86 billion in developing electric vehicles and other new technologies over the next five years. Nissan says it will sell the Ariya, an electric crossover SUV, next year in the U.S. and other markets.

In the biggest climate commitment made by any nation, China pledged to go carbon neutral by 2060. While it will be challenging for Beijing to achieve its goal, China’s plan to become a green superpower will have ripple effects around the world. Illustration: Crystal Tai

Major car companies are hustling to shift toward electric vehicles—and convince investors they can succeed—despite low consumer adoption.

General Motors Co.

said last month it was raising its bet on electric and driverless cars by more than a third, to $27 billion in investment through 2025. Today electric vehicles account for only about 2% of global sales for GM and the broader industry.

The Detroit auto giant plans for 40% of the vehicles it sells in the U.S. by mid-decade to be fully electric. If Japan’s policy spurs Toyota, Honda and other Japanese car makers to expand investment in the technology, the nascent market could become more competitive globally.

The announcement comes as the U.S. is poised to increase federal investment in electric vehicles under an energy plan President-elect

Joe Biden

aims to implement after taking office in January. He has pledged to create one million new jobs in the auto industry, including in the construction of electric-vehicle charging stations. His plan calls for a half-million new charging stations in the U.S.

The president-elect has said he hopes to use federal incentives—including tax, trade and investment policies as well as increased research and development—to make the U.S. the global leader in electric-vehicle manufacturing. He has said he would offer rebates to consumers and incentives to manufacturing facilities that build parts for low-emissions vehicles, and he backs strengthening federal fuel-economy standards.

Mr. Biden’s presidential transition team didn’t respond to a request to comment.

Write to Peter Landers at peter.landers@wsj.com and Chieko Tsuneoka at chieko.Tsuneoka@dowjones.com

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