Japan’s Nidec Corp. has developed an electric vehicle motor primarily using parts sourced from China to support Toyota Motor Corp.’s operations in the region.

The E-axle motor, which consists of 99% Chinese components, is featured in Toyota’s bZ3X SUV, launched in March.

The bZ3X is priced at around 110,000 yuan (US$15,350) and has sold around 20,000 units since its introduction, according to Toyota.

This model is the first to use Nidec’s motor, as Toyota aims to regain market share in China, the largest auto market globally.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Bucking the trend: Strategic counter-current investments in China

Nidec and Toyota’s expansion in China represents a strategic exception to the broader pattern of Japanese corporate retreat from the Chinese market.

While many Japanese firms have been reducing their China presence due to geopolitical tensions and rising costs, Toyota’s new $2 billion Lexus factory in Shanghai and Nidec’s $100 million Qingdao manufacturing hub signal a contrarian approach to the world’s largest consumer market.

This comes as Japanese investment into China showed modest growth of 3% in early 2024, following a 6% increase in 2023, according to Japan’s Ministry of Finance data cited in the article.

The investment strategy demonstrates a calculated risk, as political tensions between Japan and China remain significant, with executives having to navigate carefully between economic opportunities and geopolitical realities.

These investments align with historical patterns where, despite challenges, Japanese firms have maintained substantial economic interests in China, with approximately $117 billion invested by 32,000 Japanese companies as of 2017 1.

2️⃣ Extreme localization as the new competitive necessity

Nidec’s 99% locally-sourced EV motor represents one of the most aggressive localization strategies by a Japanese manufacturer in China, reflecting the new reality of competing in the world’s largest auto market.

This approach directly addresses the core challenge of price competitiveness in China’s EV market, where Toyota’s bZ3X vehicle sells for just 110,000 yuan ($15,350), requiring fundamentally different cost structures than global supply chains can typically deliver.

The strategy marks a significant evolution from earlier Japanese business approaches in China that focused primarily on exploiting low labor costs, to now targeting the growing Chinese consumer market through deeply integrated local operations 1.