Japanese government aims to boost domestic market for used electric vehicles; aims to preserve critical minerals in batteries

The government is planning to promote the used electric vehicle (EV) market and develop a system for domestic recycling of batteries used in EVs amid concerns over the outflow of crucial minerals from Japan, it has been learned.

Japan sources essential minerals needed to produce batteries from China and elsewhere. However, 80% of EVs in use are exported — meaning minerals are flowing back out of the country.

According to sources, the government wants to increase economic security by introducing a service that guarantees the performance of used batteries. In this way, the government wants to promote the spread of electric cars and the domestic circulation of used electric cars and their batteries.

With the involvement of the private sector, the Ministry of Economy, Trade and Industry will support the development of a market for used electric vehicles and the secondary use of batteries.

In particular, the public and private sectors will work together to create a service that guarantees the quality of EV batteries.

Under that service, property insurance companies will introduce a new insurance policy for electric vehicles in September that guarantees the performance of the vehicle after battery manufacturers assess the condition of the batteries. If the batteries deteriorate during the warranty period, the policy will cover replacement batteries or even replacing the entire vehicle with another of a similar model. The insurance, with premiums of around ¥20,000-¥30,000 per unit, is expected to be sold to used car dealers.

The government also provides that batteries that are no longer usable in electric vehicles due to reduced performance can be converted for use in golf carts and other small vehicles.

Japan imports 90 percent of the graphite it needs to make batteries from China. However, the graphite supply has become unstable since China imposed export restrictions in December last year. The export restrictions are seen as a countermeasure to restrictions by Japan, the United States and Europe on advanced semiconductor exports to China.

Because it is difficult to determine the deterioration status of a battery, used EV prices tend to drop faster compared to hybrids and other vehicles, and most used EVs are sold overseas. This is one reason why new EVs are not sold more widely.

For the demonstration project, the ministry has selected support recipients including Prime Planet Energy & Solutions Inc., a joint venture manufacturer established by Toyota Motor Corp. and Panasonic Holdings Corp. It has also selected Yamaha Motor Co. and a subsidiary of SOMPO Holdings Inc. The government plans to subsidize up to two-thirds of the cost of the feasibility test.

The government has set a target that by 2035 all new passenger cars sold will be electric, including hybrids. The number of batteries in circulation is expected to increase as a result.

The Japan Research Institute Ltd. estimates that if there is a circular model for all

If used EV batteries could be produced in Japan, the associated market would be worth about ¥600 billion in 2030 and about ¥8 trillion in 2050.