Tesla has witnessed declining sales over the last couple of years, both as a result of increasing competition and the decreasing appeal of its CEO. While the company’s once rapid growth has cooled in most markets, there’s one place in the world where a new Model Y is kind of a no-brainer: Tokyo.
A mix of factors has made it possible for someone to buy a brand new Model Y for a little under $23,000, which is cheaper than anywhere else in the world, including in China where these Model Ys are built. Some of this is subsidies, as Tokyo has become particularly aggressive in terms of incentives for EV buyers, but that’s not the whole story. Plenty of states, cities, and countries offer cash or tax breaks for buying an electric car.
This is another story of currency, though not exactly how you’d think. The Japanese yen has weakened relative to the dollar and relative to the Chinese yuan. Normally, that would mean a car might be more expensive to buy. What’s going on here?
Tokyo Wants More Electric Cars
One of the secondary tragedies of the massive nuclear disaster following the Tōhoku earthquake and tsunami was that it slowed the development of electric cars in Japan. Levi Tillemann contends in his book “The Great Race” that the association between EVs and nuclear power was so strong that the sudden anxiety around nuclear power led Japanese automakers to shift to focusing on hydrogen cars.
The country’s biggest car companies have haphazardly changed their course and steered back towards electrification, and local governments are doing their part to help. The Tokyo Metropolitan Government is one of the most aggressive, as Nikkei Asia reports:
The Tokyo Metropolitan Government will increase purchase subsidies for electric vehicles to up to 1.3 million yen ($8,130), part of an effort to encourage more Japanese consumers to buy the environmentally friendly autos.
Subsidies for EVs and plug-in hybrid vehicles will be increased by 300,000 yen, with a cap of 1.3 million yen for EVs and 1.15 million yen for hybrids. Both individuals and businesses are eligible, and there is no limit on the number of vehicles that can be purchased.
According to that article, Japanese automakers Toyota, Nissan, and Honda qualify for the largest subsidies, but the Chinese-built Tesla Model Y comes close. Even before the subsidies, the base Model Y RWD Premium only costs around $34,000. After subsidies, it’s chump change. Per Bloomberg:
Tesla lists the Model Y as costing ¥5.6 million in Japan. But a buyer living in Tokyo can get it from ¥3.6 million ($22,889) thanks to a maximum of around ¥2 million in national and city subsidies. With those benefits, a Model 3 can go for as little as ¥3.3 million.
The Tokyo prices undercut those in notoriously competitive China, where a Model Y starts at around 263,500 yuan ($39,344). In California, where the state offers as much as $3,500 in incentives for first-time EV buyers, the SUV still costs more than $36,000.
Given the recent weakness of the yen, how is Tesla getting away with this?
Currency Rules Everything Around Me, Part 914
I often say that currency is the most important factor in the automotive world we rarely ever talk about and that’s true here. However, the usual cause and effect of producing an item in one place at one price and selling it somewhere else isn’t quite operating as expected in this case.
The yen has weakened relative to both the US dollar and the Chinese yuan over the last few years, which is good for tourists but not necessarily great for importers. Most exporters try to make something cheaply in one country and sell it in another country with a stronger currency, and not the other way around. Removing any efficiencies Tesla might have found in producing the Model Y, in theory, a Chinese-built Model Y should cost more to sell in Japan than it did a few years ago.
Most cars in most markets are sold by dealers, and when currency (or tariffs or whatever) impact cost, this is usually offset by either increasing or decreasing incentive spending depending on whether or not it’s a favorable or unfavorable change. Tesla doesn’t have dealers and can therefore change prices overnight, as it sometimes does.
The company hasn’t been actively swapping prices in Japan, so even if the average consumer has seen their buying power drop alongside the yen, it appears to someone in a country with a stronger currency like the car is a lot cheaper. When measuring the yen price and converting it to dollars, after subsidies, the Model Y seems suddenly insanely inexpensive.
Why has Tesla let this continue? The Model Y, even in refreshed form, is still an older car, and presumably the company is able to make it at a relatively inexpensive price. Tesla seems to be targeting Japan thanks to its nearby production capacity and generous subsidies. With companies like Mercedes and BMW on their heels in the country, the EV-only automaker sees an opening to steal some market share.
The plan is clearly working. Through the first half of the year, Tesla has sold roughly 12,000 cars in Japan, compared to just 10,000 for all of 2025. Japanese consumers bought 4,000 Model Ys in June alone.
So some of this is subsidies, some of this is Tesla pressing its advantage, and some of this is just a quirk of the way currency works.
Top graphic images: Tesla; DepositPhotos.com
The currency section of this is very confusing. I think what you’re saying is that Tesla hasn’t raised prices to account for the weaker yen, but that doesn’t really explain why it was so cheap in the first place. At best, this means currency is a non-issue to the surprisingly low price.
i’m thinking that if USA gets Chinese built Teslas, we could probably get these for not much more than $23K depending on trump’s tariff o’ meter that day.
Let me guess. They have sold 2 total. Japan doesn’t buy American cars- infamously so.
Holy crap. Color me shocked. Maybe they don’t see them as “American cars” but it seems that any time Ford, GM or Chrysler tried to do any business there they sold like maybe a handful of cars. But 10,000+? That’s not chump change!
When I was in Japan for a couple weeks (admittedly over 10 years ago…) I was shocked by how few Japanese car models I recognized from the States. At least in Japan’s big-midsize urban areas most of the cars were tiny little boxy hatchbacks, Kei cars, and short but tall and boxy mini vans. I don’t think I saw a single Civic, Corolla, or even the small by US standards Fit/Jazz. Point being American car makers make very few vehicles that are competitive in the Japanese market and a lot of what we think of as Japanese cars are quite tailored to American tastes and environments.
One of the things I found interesting because it was so different from North America was that even small towns in rural farming areas were quite dense by American standards, meaning even in farm country most people drove very small cars. Talking to my brother’s friend from his study abroad he literally couldn’t comprehend what I meant when I asked him if he’d done any cool road trips. After a lengthy explanation I was able to get the idea cross but said he wasn’t aware of anyone who’d taken an interstate road trip and that you’d take the bullet train or fly if you wanted to go somewhere further away than the next town or two over.
Feel like this was a Tom Waits joke…. He’s big in Japan 😉
Japan, like China, doesn’t want to be reliant on oil. They want energy security, which means being able to power consumer transportation without being addicted to a globally traded volatile substance sourced from outside. Additionally, the bigger news seems to be taking a back seat here. There is now substantial interest with the Japanese market in moving forward. If those manufacturers completely take the EV route, that would represent a disruptive economic move in regards to those who didn’t., putting them further behind and less able to take advantage of the economies of scale in manufacturing.
The nuclear ev association may certainly be one factor.
A larger factor I would expect the long ill relations between China and Japan for a lot of historical reasons.
Add in the fact China controls +70% of all ev production in the form of rare earth magnets, ev motors, inverters and especially batteries all leads the Japanese govt. to heavily subsidize the pipe dream of hydrogen production bc they dont want to be reliant on China that the Chinese govt. could completely decimate at any time
This depresses me (more) for some reason.
Had Tesla gone ahead with their sub-$25,000 car one size below the Model 3, the company would have kept growing at a high rate and that smaller vehicle would be huge in places like the EU and Japan.
Not even for free.
Especially the Model Y, which is just odd looking and ungainly from pretty much any angle. It is, however, marginally better looking than the Model X.
The only remotely decent looking Tesla was the original S, then they progressively ruined it. And it was just a pastiche of every European luxobarge to start with.
The Model 3 looks like they made a bar of soap in the shape of a 1996 Dodge Stratus and gave it to Elon to shower with for a month, and the end result is what they put into production.
So, like a bar of soap that’s used twice?
I’m missing something. I get how the Tesla is so much cheaper in Japan/Tokyo because the subsidy. But how does that affect the sales and cost in China?
We could use some chump change in Washington DC, amirite? I’d sure like to change some chumps, is what I’m saying! Eh? [fart]
That made the dad joke in me happy.
Was wondering if there was also a provision in the taxing regimes for these cars… and it sounds like they are low-tax until at least 2028 when both Shaken and Jidōsha-zei when both are set to be reworked.
Not exactly kei-car low tax, but lower than similarly-sized ICE vehicles with typical engine displacement sizes (for the JDM).
Japan charges annual road tax on ICE cars based on displacement – and cars which exceed a certain width are also taxed at a higher rate.
However due to declining tax income necessary to continue maintaining roads to the high standard the Japanese have come to expect – the government is planning on charging road tax based on weight for EVs and plug-in-hybrids.
How would the car world look like if everyone used Japanese rules and laws? I bet the Autopian would not exist
Weird take – as if there are no auto enthusiasts in Japan.
Where do you think drifting, Z cars, most rotary engines, and Zoom-Zoom came from?
Odd observation. In Japan there is much to admire but also, like the USA, many laws and customs that most people here would regard as silly, or a lot worse than that.
To take a non-offensive example, in some area (like Tokyo) building street addresses are not assigned sequentially as you go down the street, but in the order of when the building was built! GPS systems became popular as soon as they were available in Tokyo.
Taxing based on weight is an excellent idea as it directly correlates to wear and tear on the road system. I wish our government was brave enough to implement a similar system – as car sizes continue to balloon.
I do think large households should be given some sort of subsidy though. You shouldn’t be penalised if the only car you can practically cart your family around in is a 7-seat minivan.
I think that if anyone can afford 5 kids, they can afford to pay taxes on a larger vehicle.
Otherwise – don’t have so many kids.
With just 3 kids and a bank account balance in the double digits… No I cannot afford to pay more taxes, at 5 not happen g either.
Shaken is due for a rework?
Not Stirred?
“the association between EVs and nuclear power was so strong that the sudden anxiety around nuclear power led Japanese automakers to shift to focusing on hydrogen cars.”
Oh obviously when fears of nuclear proliferation arise, you pivot to hydrogen. J. Robert Oppenheimer would not have approved.
Goood joke.