Evaluating Transition Plans in Japan’s High Emission Sectors 2025 Automobile Sector
Background and Objective
In 2023, KSI conducted a study to assess the extent to which Japanese high-emitting industries and the banking sector have advanced the formulation of transition plans and published a report “Evaluating Transition Plans in Japan’s High Emission Sectors”. The results showed that while disclosure of historical emission data is progressing, there are challenges in setting 1.5°C-aligned science-based targets, presenting corresponding emission pathways, establishing short-term implementation plans to achieve reduction targets, and defining Scope 3 reduction targets. In the coming years, attention will increasingly focus not only on revising targets to be more ambitious, but also on verifying implementation and actual achievement.
Building on these findings, this study, while following the perspective of the previous one which focused on providing an overview of corporate transition plans, gives greater emphasis on examining the implementation status of transition plans, actual emission reduction performance, and the consistency of business portfolio and capital allocation plans with the stated transition strategies. The study also compares Japanese companies with their international peers to identify current trends and challenges.
Coverage
Toyota Motor Corporation
Honda Motor Co., Ltd.
Nissan Motor Co., Ltd.
Mitsubishi Motors Corporation
Suzuki Motor Corporation
(Reference overseas companies)
General Motors Company (U.S.A)
Mercedes-Benz AG (Germany)
Hyundai Motor Company (Korea)
Key Findings
Scope 1 & 2 Emission Reduction Target (Indicator 1.1)
All five Japanese companies aim for Scope 1 and 2 carbon neutrality by 2050 and have set interim targets for 2030/2035.
Toyota and Suzuki have also set separate carbon neutrality targets for their manufacturing plants.
The three overseas companies have set earlier carbon neutrality targets, ranging from 2039 to 2045.
Scope 3 Emission Reduction Target (Indicator 1.2)
Four of the five companies aim for carbon neutrality in product CO₂ emissions (average CO₂ emissions per kilometer) by 2050.
Among overseas companies, GM and Mercedes target carbon neutrality for the same metric by 2040 and 2039, respectively.
Toyota and Nissan—and among overseas firms, Mercedes—have set short- and mid-term reduction targets for life-cycle emissions.
Level of Ambition of Emission Reduction Target (Indicator 1.3)
On the 2050 pathways, four Japanese companies (excluding Suzuki) and all three overseas firms align with 1.5°C, while Suzuki is in the below-2°C range.
For the 2035 mid-term outlook, Mitsubishi is aligned with 1.5°C, Toyota, Honda, Mercedes, and Hyundai are in the below-2°C range, and the remaining three companies follow a current-policies scenario.
Business Portfolio Plan（Electrification Plan for Vehicles） (Indicator 1.4)
All companies set electrification targets either as a share of sales or in units.
Among Japanese companies, only Honda has a 100% electrification target—producing and selling only ZEVs in the future.
Even for Honda, Japan’s automakers are increasingly shifting emphasis toward HEVs in response to weak EV demand.
Scope 1 and Scope 2 Absolute Emissions Reduction Performance (Indicator 3.1)
Overall, Japanese companies show a declining trend in Scope 1 and 2 emissions.
From each company’s target base year to 2023, reduction rates range from 16% to 37%, while Mercedes stands out among overseas firms with a 70% reduction.
Toward achieving its 2030 target, Toyota will need to accelerate emission reductions beyond its past pace.
Scope 3 Category 11 Absolute Emission Reduction Performance (Indicator 3.2)
Three of the five Japanese companies reduced emissions over the past three years, while one saw increases for two consecutive years.
Although each company sets reduction targets based on new-vehicle average emissions (g-CO₂/km), few disclose actual emission data, resulting in limited transparency.
Life-Cycle Emissions Reduction Performance (Indicator 3.2.4)
Two of the five Japanese companies disclose their life-cycle emission reduction results.
All companies disclose driving-phase emissions (Scope 3 Category 11), but only three provide results for other categories such as procurement or end-of-life.
Application of Internal Carbon Pricing (Indicator 3.3)
Four of the five Japanese companies use internal carbon pricing, and only two disclose the assumed carbon price.
Linking Emission Reduction Targets to Executive Compensation (Indicator 3.4)
In three of the five companies, CO₂ reduction serves as an incentive in executive compensation.
Implementation Plan and Progress (Indicator 2.1)
Each company is working to reduce emissions across the value chain, including procurement, vehicle manufacturing, logistics, and end-of-life processes.
For the driving phase—the largest source of emissions—they are advancing the rollout of BEVs while also pursuing non-electrification technologies such as fuel cells and biofuels.
In procurement, the second-largest source of emissions, two of the five Japanese companies disclose initiatives to source low-carbon steel, and two overseas companies have set procurement targets as well.
Capital Allocation (Indicator 2.4)
Four of the five Japanese companies disclose electrification investment amounts, with Mitsubishi showing the highest share of such investments.
Suzuki discloses future investment plans, including spending outside electrification.
Mercedes reports its capital allocation breakdown under EU disclosure rules, with all investments taxonomy-eligible.
Overall, it remains difficult to see how companies allocate capital between decarbonization businesses—including electrification—and traditional ICE-based businesses.
All five Japanese automakers aim for carbon neutrality by 2050 and have set interim targets. Between their base years and 2023, Scope 1 and 2 reductions ranged from 16.7% to 37.6%. Their targets, base years, and FY2023 results are as follows.
Toyota: −68% vs. 2019 by 2035 / −20.6%
Honda: −46% vs. 2019 by 2030 / −37.6%
Nissan: No absolute target / −28.4% (vs. 2018 total emissions for the intensity target)
Mitsubishi: −50% vs. 2018 by 2030 / −33.9%
Suzuki: −42% vs. 2022 by 2030 / −16.7%
Comparing the average annual reduction rates since the base year with the rates required to meet their targets, Honda and Mitsubishi can reach their goals at a slower pace than before, while Toyota will need to accelerate from 5.6% per year to 7.3% (Nissan with no absolute target and Suzuki with a 2022 base year are excluded).
While all five companies show a declining trend over the past three years, Toyota and Suzuki experienced increases in some years.
Reducing Scope 1 and 2 emissions in the automotive sector depends on electrifying production and securing clean energy. Mercedes-Benz has cut emissions by 70.4% from its base year through these measures. Overseas peers set clear renewable-energy targets and actively use PPAs, while Japanese companies generally do not disclose such targets. Toyota has achieved 100% renewable power at all plants in Europe and South America, and others are increasing on-site generation, but wider renewable procurement—including PPAs—still appears early. Further progress in renewable sourcing will be important to watch.
In the automotive sector, Scope 3 emissions from vehicle use (Category 11) far exceed Scope 1 and 2. Companies use average CO₂ emissions per kilometer (g-CO₂/km) for new vehicles as a common metric, and both Japanese and overseas automakers set targets using this indicator (except Hyundai). Japanese companies do not disclose actual figures for the base year on which they set 2030-2035 target in reduction rate. That makes it impossible to assesse whether their targets align with international benchmarks.
TPI also assesses carbon performance using average new-vehicle CO₂. According to its benchmarks, alignment with a 1.5°C pathway in 2030 is 55.16 g-CO₂/km, and the below-2°C range is 85.99. Mitsubishi falls within the below-2°C range, while the other four remain at current-policies levels.
Disclosure of not only base-year data but also past-year results is limited. Toyota publishes country-level data, while Nissan and Mitsubishi disclose only the figures required in Europe, and Honda and Suzuki provide none. Although disclosure outside Europe—including Japan—is not mandatory, actual data should be made available given that these metrics are used for target setting.
While all automakers envision long-term BEV dominance, Japanese companies set slower targets often viewed as less ambitious than overseas peers. Honda (2040), Mitsubishi (2035), and Suzuki (2030 for Japan and Europe) declare "100% electrification," but definitions vary: Honda limits this to BEVs and FCEVs (both ZEVs), while Mitsubishi and Suzuki include HEVs and PHEVs." This reflects the Japanese government’s aim for BEVs, PHEVs, and HEVs to reach 100% of new passenger-car sales by 2035. HEVs account for over half of Japan’s passenger-car market and are a strength for Japanese automakers, but they are not considered ZEVs internationally, and even PHEVs are excluded under EV100.
Amid softening BEV demand, several automakers have delayed BEV targets during this survey period. Honda, for example, revised its four-wheel strategy in May, lowering its 2030 BEV sales target and signaling a stronger focus on HEVs. Similarly, Mitsubishi had planned to launch two in-house BEV models but shifted course, deciding to prioritize HEVs and PHEVs and rely on partners for BEV OEM supply. Amid political and market shifts in the U.S., Europe, and other regions, the automotive sector is clearly at a major turning point. The industry’s next steps warrant close attention.
According to the IEA’s EV Outlook 2025 (*1), global EV sales surpassed 17 million units in 2024 and continue to grow. Although growth has slowed in Europe and the U.S. due to reduced or expired incentives, sales are still increasing. Emerging markets are also showing strong growth, suggesting that the overall shift to EVs will continue.
In the EV shift, mineral extraction for battery production has often been cited as an environmental and emissions challenge. However, over 90% of lithium and over 95% of nickel and cobalt are already recovered from recycled batteries, and advances in recycling technology suggest that new mining could be significantly reduced by 2040. Battery prices are also expected to decline, and as the environmental impact of production falls, EVs will become an even more rational choice in terms of both cost and environmental performance (*2).
EV adoption faces challenges such as greening the energy mix, expanding charging infrastructure, and stimulating demand. These issues cannot be solved by automakers alone and require strong policy support.
On the demand side, the Japan Climate Leaders' Partnership (JCLP) has called for accelerating the commercial vehicle shift to zero emissions, urging clear government direction, flexible regulations,infrastructure subsidies, and demand-stimulation measures (*3). EV100—an international initiative to make corporate mobility 100% zero-emission—now has 114 member companies worldwide, including in Japan, and pressure from decarbonizing businesses is expected to continue increasing.
There are also studies suggesting that EVs have the lowest lifecycle emissions regardless of the fossil-fuel share in power generation, indicating that widespread EV adoption does not need to wait for full decarbonization of the energy mix (*4).
Among the overseas companies reviewed in this study, several are investing actively in charging infrastructure, with automakers themselves taking the lead—an impressive move. In Japan as well, progress in EV adoption will depend on coordinated efforts by government, industry, and local communities.
Expanding the lifecycle perspective
Globally, Tank-to-Wheel has been the standard boundary for evaluating vehicle environmental performance, but Japan adopted Well-to-Wheel in 2016 to more fairly assess EVs and PHEVs, which have low driving emissions. More recently, there is a shift toward expanding the boundary to full lifecycle assessment (LCA).
Among the companies surveyed, four out of five target carbon neutrality by 2050 on a lifecycle basis. However, only two have set short- and medium-term targets, and only these two report their reduction progress. Details on how lifecycle emissions are calculated are not disclosed, leaving it unclear which Scope 3 categories are included.
Among overseas companies, Mercedes publishes product-level environmental assessments under its “360° Environmental Check” (*5). For each model, it evaluates environmental impacts across the full lifecycle—from raw materials and manufacturing to vehicle use and end-of-life—and provides detailed reports to customers and stakeholders, making it a leading example among peers. The company has conducted this assessment since 2005 and undergoes third-party verification.
The EU is currently developing an LCA methodology and plans to request voluntary lifecycle-emissions reporting from 2026 (*6). In Japan, the automotive industry association also supports LCA assessment and has issued evaluation guidelines (*7). As LCA adoption grows, companies may be expected to disclose LCA results and set lifecycle-based reduction targets. Unified boundaries and calculation methods will be important for ensuring accurate comparative assessments.
Green steel procurement
In the automotive sector, supply-chain emissions are second only to use-phase emissions, and steel—an essential and most widely used material in vehicle production—is a major source. As lifecycle-based reductions become increasingly important, procuring low-carbon steel will play a growing role in reducing Scope 3 emissions for automakers.
In reviewing automakers’ commitments on green steel procurement, we found that some Japanese companies have begun sourcing green steel from certain steelmakers, but none have set procurement targets or other formal commitments. Globally, initiatives such as the First Movers Coalition, ResponsibleSteel, and SteelZero are driving decarbonization in the steel sector, yet no Japanese automaker has joined these initiatives.
The steel sector is a high-emission industry where decarbonization is urgently needed, and automakers—major customers of steel—will play an important role in this transition. This implies growing societal expectations for low-carbon steel use in vehicle manufacturing. At the same time, there is still no internationally unified definition of “green steel,” and future developments will need to be closely monitored.
The EU, aiming to lead the creation of a green-steel market, has developed the European Steel and Metals Action Plan (*8). In Japan as well, support measures and regulations for both suppliers and buyers are under consideration (*9), and discussions on this topic are expected to intensify going forward.
In addition, Japan’s Ministry of Economy, Trade and Industry has added a new green-steel criterion to the FY2025 Clean Energy Vehicle Subsidy program, allowing automakers to receive up to an additional ¥50,000 depending on their plans and efforts to adopt low-carbon steel. Such demand-side incentives are expected to encourage broader green-steel procurement commitments among automakers.
Capital allocation plans
Capital allocation plans are increasingly important in transition-plan guidance, as they enhance the credibility and transparency of corporate decarbonization strategies. Alongside emissions-reduction targets, clearly indicating which businesses, technologies, and facilities will receive investment strengthens confidence in the plan.
Currently, most automakers disclose investment amounts for electrification, but it remains difficult to understand the overall allocation between decarbonized business — including electrification — and conventional internal- combustion vehicles. Disclosure on investments in other decarbonization measures is also limited, even though initiatives such as factory and lifecycle carbon neutrality require significant capital expenditure and R&D. Greater visibility into capital allocation aligned with strategy is therefore expected.
Just transition
A just transition is a key concept for ensuring that the shift to a decarbonized economy minimizes negative impacts on jobs and local communities while enabling a sustainable society.
Corporate disclosure on just transition remains limited. Among Japanese automakers, Toyota notes hydrogen engines as one option for protecting jobs, and Nissan briefly states that it aims to realize carbon neutrality “in line with just transition principles,” but neither provides detail, and other companies make no reference at all.
Overseas automakers show a similar pattern, though Mercedes offers more advanced disclosure. It declares its commitment to a just transition and outlines key focus areas—HR strategy, respect for human rights in the supply chain, responsible policy engagement, and community engagement—presenting its overall approach publicly.
Just transition has not traditionally been a major focus in corporate transition planning. However, given the complexity of automotive supply chains, it is a particularly important —and challenging—topic for the sector, and attention to it is likely to grow.