Japanese Government to Provide 1.1 Trillion Yen Subsidy to Toyota for EV Battery Development

Ministry of Economy, Trade and Industry to Support Lithium Battery Development with 120 Billion Yen
10% Global Market Share... "We Will Close the Gap"

Japanese automaker Toyota Motor Corporation has declared its focus on developing electric vehicle (EV) batteries, and the Japanese government announced that it will actively support this effort by providing subsidies amounting to 120 billion yen (1.09 trillion KRW).

According to reports from Nihon Keizai Shimbun (Nikkei) and Yomiuri Shimbun on the 16th, the Ministry of Economy, Trade and Industry announced that it will provide 120 billion yen in support for EV lithium-ion batteries developed domestically by Toyota. The estimated related budget by Toyota is 330 billion yen (2.9926 trillion KRW), and the Japanese government has readily offered about 36.3% of that amount.

With this subsidy, Toyota plans to increase the annual production capacity of domestic EV batteries by approximately 25 GWh. In addition, the subsidy will be invested in the development of lithium iron phosphate (LFP) batteries, considered next-generation batteries, as well as in solid-state battery research announced on the 13th.

Yomiuri reported that this subsidy will also be used for the Toyota-Panasonic joint factory. The goal is to establish a system that can stably procure batteries and supply finished vehicles even if the battery supply chain is disrupted by natural disasters such as earthquakes.

As a result, there is growing interest both inside and outside Japan regarding how prominently Toyota can perform in the EV sector, where it has struggled so far. On the 1st, Toyota announced an additional investment of 290 billion yen (2.75 trillion KRW) in its US EV factory scheduled to start operations in 2025. Leveraging the US Inflation Reduction Act (IRA), which provides subsidies for EVs assembled in North America under the Biden administration, Toyota aims to secure overseas competitiveness. With the support from the Ministry of Economy, Trade and Industry added, Toyota will effectively receive EV subsidies from both the Japanese and US governments.

This strongly reflects the Japanese government’s determination to catch up in the EV market gap. According to Japanese research firm SNE Research, Chinese brands hold over 50% of the global market share for automotive batteries, while Korean brands hold about 20%. Japanese brands account for only around 10%. In response, the Ministry of Economy, Trade and Industry designated automotive batteries as important materials for economic security and secured 330 billion yen in the second supplementary budget last year to support supply and development in this sector.

The Ministry of Economy, Trade and Industry is providing full support not only to Toyota but also to companies entering the EV battery market. Last month, it decided to provide about 160 billion yen (1.4509 trillion KRW) in subsidies to Honda Motor Company and lithium battery developer GS Yuasa.