TOKYO - China's BYD Co., the world's leading electric vehicle maker, has begun a foray into one of the most competitive segments of the shrinking Japanese auto market, rolling out a new ultracompact EV to compete with engine-powered minivehicles.
The automaker on Tuesday launched the Racco, a boxy small EV with sliding rear doors on both sides that was developed specifically for Japanese customers with a base price of around 2.15 million yen ($13,000).
To obtain design ideas for the Racco, BYD's engineers, who had never lived in Japan, traveled across the country to study everyday needs, identifying strong demand for minicars especially in regional areas, BYD Japan Co. President Liu Xueliang said.
Still, hybrids are far more popular than EVs, accounting for roughly 60 percent of the Japan's overall auto sales.
"Whatever happens, the global shift toward EVs is unlikely to change," Liu, who also serves as vice president of the parent company, said in a recent interview with Kyodo News.
Though powered by electricity, the Racco is the same size as Japan's 660cc-engine minivehicles, known as "kei" cars, which are narrower and shorter than the Fiat 500, the iconic Italian small car.
More than 90 percent of vehicles sold in Japan are Japanese brands and nearly a fourth of them are fuel-efficient and low-cost kei cars. The government's preferential tax for those models has also long enticed cost-conscious customers.
Auto sales in Japan, the world's fourth largest auto market, have dropped about 40 percent over the past quarter century but demand for mini cars and trucks remains relatively steady.
The minivehicle market has been dominated by Daihatsu Motor Co., a unit of Toyota Motor Corp., Suzuki Motor Corp. and Honda Motor Co. Among major carmakers, Nissan Motor Co., Mitsubishi Motors Corp. and Honda currently offer electric minicars.
"Right now, there are still very few (EV) models" available in Japan, Liu said.
The president of BYD's Japanese unit said he hopes to provide a greater variety of EV models so Japanese customers will have more opportunities to drive battery vehicles and to understand the benefits beyond zero emissions such as using the battery as a power source for other purposes.
Competition in the compact EV market is expected to intensify. Among Japanese carmakers, Honda and Suzuki are set to release new micro EVs in the next several years.
Chinese automaker Chery Automobile Co. also plans to join the fray next year, releasing small EVs under the EMTA brand through a joint venture set up with Japanese car parts retailer Autobacs Seven Co. and others.
Since the beginning of operations in the Japanese market in 2023, BYD has introduced five models. The Chinese carmaker sold 3,742 vehicles in 2025, up 68 percent from the previous year. But the figure represents only a fraction of the Japanese market of around 4.5 million vehicles.
Entering the minivehicle segment, BYD aims to jump-start its tepid sales, with an annual sales target of 10,000 vehicles for the Racco.
The company also plans to expand its dealership network to 100 showrooms by the end of this year from the current about 70 to cover all 47 prefectures across the country.
Liu said the automaker "remains committed to doing everything it can to satisfy customers despite being a challenger."
