Chinese electric cars versus Japanese hybrids is the new car battleground! BYD Shark 6, XPeng G6 and more are eyeing off the likes of the Toyota HiLux and Mazda CX-5

China’s carmakers are building and exporting electric vehicles at such a rate that it threatens to not only disrupt Japan’s long-established hold on the automotive industry, but destroy it.

Will Japan’s carmakers let this happen? Things are about to get interesting.

It shouldn’t shock anybody that Chinese car manufacturing has pivoted to the production and export of electric vehicles so quickly, so hugely and so successfully.

We all know China is a production powerhouse that can make anything and deliver it anywhere. In 2024 data from the World Bank found China was responsible for 31.6 per cent of the planet’s manufacturing output, making it the number one maker and supplier of goods. In a distant second with 15.9 per cent was the United States. 

The speed and power of China’s switch to car production can’t be underestimated. In 1985 China produced a total of 5200 cars. In 2024 it sold more than 31 million cars. The United States produced half of that with close to 16 million vehicles built. Japan produced almost eight million vehicles.

The world’s established carmakers are now threatened by what Chinese production could do to their long-held rule. There have been attempts to defend local manufacturing by several countries such as the US with tariffs, but others like Australia, which no longer produce their own vehicles, have allowed China to compete freely within our market.

Japanese carmakers are in one of the most challenging positions they've ever faced. Since the 1960s brands such as Toyota, Honda, Mazda, Mitsubishi and Subaru have provided reliable, affordable and even desirable cars that won the world over. 

Toyota was the biggest-selling car manufacturer in the world again in 2024 with 10 million sales. In Australia Toyota is also the market leader with 241,296 sales in 2024. Ford came in second with 100,170 sales and Mazda sold 95,987. Mitsubishi, Isuzu and Nissan also made it into the top 10 for 2024. But so did Korean carmakers Kia and Hyundai, and Chinese brands MG and GWM. 

For the past 15 years the Japanese carmakers have been fighting off the Korean challengers with Kia and Hyundai muscling their way into the market with popular petrol and diesel cars.

Identifying and focusing on Kia and Hyundai as a threat appears to have distracted Japanese car brands from defending against a Chinese EV push riding off the back of a surge of electric car popularity that was really powered by Tesla. 

It all happened so fast. The Japanese carmakers’ plan went: petrol, then hybrid, then electric. While the Chinese went almost straight to electricity - at least its export market did.

So now the Japanese carmakers are in the hybrid phase of their plan against the Chinese with their electric offerings.

In Australia, Honda and Mitsubishi don’t offer a battery electric vehicle, but they have plenty of petrol-electric hybrids. 

Honda has hybrid variants of all model lines including the HR-V, ZR-V and CR-V SUVs. Mitsubishi has its plug-in hybrid Outlander and Eclipse Cross SUVs, although the latter is about to be discontinued.

Subaru, Nissan and Toyota have banked on hybrids, too, but have one electric model in their line-up here in Australia. For Nissan it’s the Leaf, while Subaru and Toyota have a joint venture which produced the Solterra and bZ4X SUVs for each respectively.

Toyota appears to have put all its money on hybrids for now and is standing by that decision, with the company’s Australian Vice President of Sales Sean Hanley recently telling CarsGuide a slump in EV sales proves Toyota was right.

“I certainly don’t think anyone has got the jump on Toyota, because that’s suggesting that Toyota got it wrong,” said Hanley.

“Toyota didn’t get it wrong. Toyota got it exactly right. I mean, I’d hate to have 20,000 EVs sitting in my yard right now. I’d hate to have 10,000, right. The reality is we got it perfectly right.”

Hanley’s stance hasn’t affected the Chinese carmakers continued push into Australia. In the past 12 months we’ve seen at least six new brands launch here including XPeng, Leapmotor, Deepal, Zeekr and Smart. Electric models such as the Zeekr X, XPeng G6 and Smart #1 small SUVs are moving into Volvo’s EV territory, while Leapmotor’s C10 is coming after Toyota’s bZ4X. 

This year Australia will see the arrival of more electric vehicles from new Chinese brands. There’s Jaecoo, GAC and Skywell. But one to watch is Geely, the giant that’s a part owner of Volvo and Zeekr.

Along with more established Chinese brands such as BYD with its Atto3 small SUV and Shark 6 ute, and MG with its MG4 hatch and HS SUV, Geely could eat into Toyota's dominance.

Affordability and battery technology are the Chinese carmakers biggest weapons in this battle. Some of the new Chinese EVs we’ve seen are solid to drive, with appealing styling.

But it won’t come down to just a battle of purely electric versus hybrid. Chinese carmakers will very likely offer hybrids if the market appears to become EV saturated. We’ve not only seen that with the upcoming Leapmotor C10 REEV hybrid but also with brands such as GWM with their Haval Jolion hybrid SUV. 

Don’t count the Japanese brands out, however. Those in healthy enough financial shape such as Toyota might be able to withstand losing electric sales, comfortably knowing the entire population won’t shift to electric tomorrow, or even in the next 20 years, and by that time it will have phased in its own electric offerings. 

Kia and Hyundai seem to be in secure positions for a different reason in that both sister brands are now enormous, but also offer a broad range of powertrain variants from EV and hybrid to petrol and diesel. To be frank, Kia and Hyundai could come out of this decade in the best shape.    

A big concern is the Japanese carmakers in financial difficulty. In late 2024 a Nissan insider told The Financial Times, “We have 12 or 14 months to survive”. 

Nissan has been in an alliance with Renault and Mitsubishi, but it’s now looking at a new alliance with Honda.

That could provide a way to counter the joint threat of Chinese carmakers, but reports published in the past couple of days suggest the talks are on shaky ground with Nissan considering a new partner.  

Yes, we are living in interesting automotive times, but if you’re a buyer just remember, it’s you they are fighting over and that can only mean better deals for consumers.