The Japanese Government's Bet Against Tesla

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June 27 2014 12:57 PM

The Japanese Government's Bet Against Tesla

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Can Tesla take off in Japan? Seems like its government might not want it to.

Photo by Stan Honda/AFP/Getty Images

This post first appeared in Business Insider.

The Japanese government has announced measures that could indirectly pressure Tesla sales in Japan. 

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On Tuesday, Japanese Prime Minister Shinzo Abe said his administration would begin providing additional support to the country's fuel-cell vehicle industry, as part of his overall growth plan. It's something of an unusual move, given that Japan is the world's second-largest market for plug-in vehicles.  

We recently wrote about the burgeoning civil war in the renewable fuels world between charge-batteries and fuel cells. Tesla CEO Elon Musk called them "fool cells" at the company's annual meeting earlier this month. This announcement is the latest chapter in that struggle, and it coincides with news out of Toyota that it would be releasing a Camry-sized hydrogen fuel cell-powered car in Japan for next year.* 

The new sedan will be priced at $69,000 (or ¥7 million)—exactly $1,000 lower than the price of a Tesla Model S. That is unlikely to have been a coincidence, according to Lisa Jerram, senior research analyst at Navigant Research. "It does seem as though they're attempting to compete in that category," she told Business Insider, noting that the $69,000 price tag is actually lower than the $100,000 initially floated. 

Japan's per-capita penetration of electric vehicles matches the U.S.'s, according to HybridCar's Jeff Cobb, and last year, Tesla was the only U.S. automaker to show at the Tokyo's Motor Show. 

Despite this seeming opportunity for the California firm, plug-ins may soon face pricing pressure in Japan. Jarrem said the country has been ramping up fuel-cell production for its electric generation sector in the wake of the Fukushima disaster. The size of Abe's subsidies for fuel-cell vehicles weren't announced, but the goal is to have the sector generating 1 trillion yen ($9.8 billion) in revenue by 2030. To do so, he's set a target of bringing fuel-cell car prices down to $20,000 by 2025. 

Meanwhile, in a note this week, Morgan Stanley's Adam Jonas confirmed that half the auto industry seems to be abandoning electric vehicles in favor of fuel-cell vehicles, the result of chicken-and-egg-esque forces of flagging demand and a half-hearted commitment to building out the necessary plug-in infrastructure. The broader goal, he says, is to get governments to respond accordingly.

"We see the [fuel-cell vehicle] push as a diversionary tactic to slow down, if not completely reset, a regulatory framework scripted to support mass adoption of EVs that don’t appear ready for prime time," he wrote. 

It seems to be working in Japan.

*Correction, June 30, 2014: This post originally misstated that Toyota will be releasing a Camry-sized hydrogen fuel cell. It will be releasing a Camry-sized hydrogen fuel cell-powered car.”

Rob Wile is a reporter at Business Insider. Follow him on Twitter.

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