Here is a detailed article about the JETRO news regarding electric vehicle CKD parts import duty reduction:
Japan to Expedite Phasing Out of Import Duty Reductions for Electric Vehicle CKD Parts
Tokyo, Japan – August 5, 2025 – The Japan External Trade Organization (JETRO) has announced that the import duty exemption and reduction measures for Complete Knock Down (CKD) parts used in the manufacturing of electric vehicles (EVs) will be terminated earlier than previously scheduled. The initiative, aimed at fostering the domestic automotive industry and promoting the transition to electric mobility, will now see its concluding phase at the end of 2026.
This decision marks a significant adjustment to the existing policy, which was designed to support the nascent stages of EV production in Japan by making imported CKD components more cost-effective. The extension of these preferential tariff treatments was initially planned to continue for a longer period, but the accelerated timeline reflects a broader strategic shift towards solidifying Japan’s competitive position in the global EV market.
Background and Rationale
The CKD system allows for the importation of disassembled vehicle parts, which are then assembled domestically. For EVs, this system has been instrumental in encouraging the establishment and growth of local manufacturing bases for electric powertrains, batteries, and other critical components. The import duty reductions on these CKD parts have played a crucial role in lowering production costs, thereby making Japanese-made EVs more competitive both domestically and internationally.
The decision to bring forward the termination of these measures is understood to be driven by several key factors:
- Maturation of the Domestic EV Industry: The Japanese automotive sector has demonstrated increasing capability and investment in EV production. Many manufacturers have now reached a stage where they can absorb the costs associated with full import duties without significant disruption to their operations or the market.
- Boosting Domestic Production of Components: By removing the preferential treatment for imported CKD parts, the government aims to further incentivize the domestic production and sourcing of EV components. This is expected to stimulate further investment in local supply chains, research and development, and job creation within Japan.
- Encouraging Technological Advancement: A more robust domestic supply chain for EV parts is crucial for Japan’s long-term technological leadership in the automotive sector. The accelerated phase-out is intended to encourage greater innovation and self-sufficiency in critical EV technologies.
- Alignment with Global Trade Practices: While temporary measures are common to support emerging industries, a gradual normalization of tariffs aligns with broader international trade principles and can help prevent potential trade friction.
Impact on the Automotive Industry
The early termination of these duty reductions is likely to have a notable impact on Japanese automakers and their suppliers involved in EV production. While companies that have already established strong domestic sourcing capabilities may experience minimal disruption, those still heavily reliant on imported CKD parts may face increased production costs.
Industry experts anticipate that this policy shift will encourage a more proactive approach from manufacturers to:
- Accelerate Localization Efforts: Companies will likely expedite their plans to localise the production of key EV components, including batteries, electric motors, and power control units.
- Strengthen Supply Chain Partnerships: Collaboration with Japanese component manufacturers and research institutions will become even more critical to secure a stable and cost-effective supply of necessary parts.
- Focus on Innovation and Efficiency: To offset potential cost increases, manufacturers may intensify their efforts in process innovation, manufacturing efficiency, and the development of higher-value components.
JETRO, through its extensive network and resources, is expected to continue supporting Japanese businesses in navigating this transition. This includes providing market intelligence, facilitating international business matching, and offering guidance on policy changes and trade regulations.
The revised timeline underscores Japan’s commitment to fostering a resilient and competitive domestic automotive industry, poised for success in the evolving global landscape of electric mobility. Stakeholders in the automotive sector are advised to closely monitor further policy developments and to proactively adapt their strategies to align with this forward-looking approach.
電動車CKD部品の輸入関税減免措置、2026年末に前倒し廃止へ
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日本貿易振興機構 published ‘電動車CKD部品の輸入関税減免措置、2026年末に前倒し廃止へ’ at 2025-08-05 04:20. Please write a detailed article about this news in a polite tone with relevant information. Please reply in English with the article only.