Japanese automakers are facing deepening sluggishness in the Chinese market. As all three Japanese automakers that led the Chinese market in the era of internal combustion engine cars posted double-digit sales declines in the first half of this year, leadership in China's auto market is shifting toward homegrown companies.
On the 13th, according to Japan's Kyodo News and China's state-run Global Times, Toyota's sales in China in the first half of this year totaled 694,700 vehicles, down 17.1% from the same period a year earlier. Nissan fell 15% to 237,000, and Honda plunged 34.7% to 205,800. Notably, Honda extended a streak of year-over-year monthly declines for 29 consecutive months through June.
The fact that the three Japanese automakers all posted sharp sales declines shows that a generational shift is taking hold in China's auto market. The slump for Japanese carmakers in China has continued in recent years. According to the China Association of Automobile Manufacturers (CAAM), Japanese brands' market share in China fell each year from 24% in 2020 to the 9% range last year, five years later.
Japanese cars, which once held an edge in China by touting durability and fuel efficiency, are seen as having fallen behind in the shift to electrification, leading to lower sales. In a 2025 report, global consulting firm Roland Berger said, "While other countries are accelerating electrification, Japan still has not put the spread of electric cars on track."
Cui Dongshu, secretary-general of the China Passenger Car Association (CPCA), told the Global Times, "Japanese companies relied too heavily on conventional hybrid vehicles and failed to respond properly to changing demand for plug-in hybrids (PHEVs) and pure electric vehicles (EVs)," adding, "They are also lagging in new model development, China-specific strategies, and smart features, failing to attract younger consumers." The Global Times also reported that the rise in oil prices due to the war in Iran has dampened demand for gasoline vehicles, which is among the factors behind Japanese companies' sales declines.
In contrast, Chinese homegrown companies are quickly expanding market share by leading with electric and smart cars. According to the CPCA, as of April, homegrown electric car maker BYD led China's passenger car market with a 13.2% share. Geely and Changan followed. New EV makers such as Leapmotor and Xiaomi also made their presence felt.
As a result, China's new energy vehicle market continues to grow, strengthening its position as the world's largest EV market. According to CAAM, in the first half of this year, China produced 7,438,000 new energy vehicles and sold 7,446,000, both exceeding 7 million. Those were increases of 6.7% and 7.3%, respectively, from a year earlier. New energy vehicles accounted for 49.6% of total new car sales in the first half. As a result, the penetration rate of new energy vehicles reached 58.5% as of June, up about 13 percentage points from a year earlier.
Experts said it will not be easy for Japanese companies to regain their past standing in the Chinese market. Cui said, "Given that Chinese homegrown brands have established a firm position in the EV and smart car markets, it does not look easy for Japanese companies to regain their previous market status in a short period."