Moving Fast and Electrifying Cars: Startup Disrupts Japan’s EV Market
Electric vehicles have struggled to gain traction in Japan. This startup promises to reverse that.
Three exceedingly rare “Ohkuma” vehicles are currently parked in front of a university campus in Tokyo.
These are fully electric vehicles, still uncommon in Japan’s streets where such BEVs made up just 1.5% of new-car sales in 2023, compared to over 20% in China and some European countries.1 The compact models are also to be priced at less than $9,800, an unheard-of price for consumers who expect to pay nearly double that, even after including government subsidies, for the most popular equivalents produced by Japanese makers. To top it all off, in a market still dominated by legacy automakers, these EVs are designed, manufactured, and sold by a startup – Apatech Motors – established only two years ago.
Feng Sun, Apatech Motors' CEO, former fund manager, and now naturalized Japanese citizen, occasionally lectures university students about the business of EVs on the campus where his simple answer for Japan’s mobility future is parked. The rest of the time he is zipping nimbly about to put his vision into place.
His company began B2B sales to Japanese companies last October, already securing sales for several hundred of its cars assembled in China. It is now on the way to building a factory in Ohkuma town, where the model gets its name, in Fukushima prefecture. With aspirations to eventually produce 200,000 vehicles per year and hire over 1,000 employees, the factory is slated to open later this year.
Sun hopes the investment will help revive the town, once fully evacuated after the nuclear plant accident but now deemed safe from radiation, and the broader region. But ultimately the goal is to fast-forward Japan’s sluggish adoption of EVs.
“It is often said globally that the Japanese market is difficult,” says Sun. “I believe this is because car makers have not seriously addressed the needs of local consumers.”
Sun positions Apatech Motors as an “LCC of the car industry” and its brand as an “introductory EV” for the Japanese consumers. One by one, he is trying to lower barriers for novice consumers by addressing their concerns around battery-powered cars: range, charging infrastructure, after-sales service, and maintenance.
First, Sun has chosen to focus on the compact car segment, equivalent to the kei class of “light” cars which comprises some 40% of annual sales in Japan.2 These smaller vehicles are ideal for navigating the country’s narrow roads, have better fuel economy and lower taxes, and popular for those living outside major cities, where public transportation is sparse.3 Kei EVs accounted for around half of all EV sales last year in Japan.4
Apatech Motors however believes a much larger market in this segment can be unearthed by further lowering prices.
“Existing compact EVs offered by the Japanese makers are still expensive and aimed primarily for people with high eco-consciousness rather than for widespread use. Through discussions with consumers, we concluded that a simple, reasonably priced, and easy-to-use car with proper mobility is all that is needed,” says Tomohiro Noda, Apatech Motors' Chief Risk Officer.
Prices have been brought down by reducing batteries, the most expensive component of an EV. The “Ohkuma” compact car’s range is 200km, lower than rivals, but that is still ample to cover the average 20 or so kilometers which most Japanese compact car owners drive in a day.5
By also cutting functions like quick charging ports and reducing the number of speakers and wipers, while maintaining all standard safety features, costs are minimized. Running costs can be kept at a fraction of gasoline cars and larger EVs by charging the car through a regular household outlet and by doing so overnight, when electricity fees tend to be lower.
The other important pillar to overcoming consumer hesitation is to expand options – such as lease, rental, and subscription – so that consumers can experience the quality and convenience of these EVs before purchase.
“Through subscription and other services, we want Japanese consumers to experience EVs so that they can figure out whether these cars match their lifestyles,” says Sun.
Apatech Motors' diffusion strategy is to first offer B2B leasing to companies looking to adopt EVs in their fleet for their businesses (e.g. last-mile logistics) and provide mobility to their employees as a benefit (e.g. commuting to factories or logistics centers). The start of carbon credit trading last autumn at the Tokyo Stock Exchange, which allows companies to trade reduced emissions, has sparked strong interest in shifting company fleets to EVs, notes Sun. Companies can also use the batteries in their fleet when parked to provide electricity for company offices or factories. When idle during the day, they may be rented out for car-sharing services.
Another important measure is to allay any concerns around maintenance as well as safety by involving various Japanese partners and moving production itself to Japan.
Apatech Motors is forming partnerships with Japanese companies for maintenance and looking to supply parts from local Tier 1 and 2 suppliers to manufacture more of its EVs locally. Sun says the company differs from other startups in not denying ICE vehicles, but instead fusing the best technologies of traditional gasoline cars to EVs. The Ohkumas are, apart from the electric motor and batteries, all manufactured from the frame and parts of a long-standing gasoline-car model, thus ensuring confidence in safety for consumers. And by building the cars in Fukushima and eventually using more traditional Japanese auto parts suppliers, he hopes to alleviate consumers' concerns of quality.
“Our product is an environmentally friendly small EV vehicle. In addition to our products, we also plan to offer a variety of services such as car sharing, car rental, and subscriber ownership. By combining these products and services, we hope to make the daily mobility of Japanese people less environmentally burdensome,” says Sun. “Ultimately the diffusion of these cars will increase the competitiveness of the Japanese industry as a whole.”
If Sun is reading the market right, many more Ohkumas may be zipping around the country sooner than we think.
