Gasgoo- A recent development has sent ripples through the automotive sector.
Toyota and Nissan are accelerating their use of Chinese components for electric vehicles produced in China. The stable supply chain, maintained for half a century through the "Keiretsu" system, faces a fundamental restructuring. Koji Sato, Toyota's former president, issued a stark warning at a recent summit with representatives from 484 suppliers: "Without fundamental change, we will struggle to survive."
This is no exaggeration. The supply chain underpinning Japan's auto industry is being profoundly reshaped by the electric vehicle revolution.
The Shift Is Already Happening
On May 8, 2026, GAC Toyota officially launched the 2026 Bozhi 3X (bZ3X). Seven models, priced between 94,800 and 144,800 yuan under limited-time offers, sit in the same range as the 2025 model but come with significantly upgraded features.
Image source: GAC Toyota
Yet, what truly caught the industry's eye wasn't the price or specs, but the new car's supply chain structure. For instance, its voice system uses iFlytek's Spark AI model, its lidar comes from Hesai's ATX, algorithms are supplied by Momenta, batteries from CALB and ZENERGY, and the domain control solution from Desay SV...
According to official Toyota data, Chinese suppliers account for 65% of the overall supply chain for the 2026 Bozhi 3X. Notably, this figure isn't unique to the 2026 model; official data shows the 2025 Bozhi 3X also hit 65% localization, a record high for Japanese brands in China at the time.
This isn't a stopgap measure but a strategic decision for Toyota's electrification transition in China. From the 2025 to the 2026 model, over 100 Chinese suppliers became deeply integrated into the core component supply.
Even more striking is the vehicle's development logic. The Bozhi 3X was led by GAC Toyota's Chinese engineering team, marking the debut of the "China Chief Engineer System."
Sales have validated this strategy: cumulative volume topped 100,000 units in 14 months, making it the fastest joint-venture new-energy model to reach that milestone. In April 2026, monthly sales hit a new high, securing the top spot among joint-venture EVs for seven consecutive months.
Subsequent models like Toyota's bZ5 and the Bozhi 7 (bZ7), which opened pre-orders in March 2026, also heavily utilize Chinese parts, cementing the trend where domestic components dominate.
But if this supply chain pivot began only with Toyota's bZ series, that would underestimate the breadth of this transformation.
Nissan is accelerating its moves, too. The N7, a pure electric sedan developed by Dongfeng Nissan, has significantly increased its procurement ratio of Chinese parts. Using the N7 as a launchpad, Dongfeng Nissan has defined a "Joint Venture New Force" transformation path deepening across four dimensions: technological advancement, product layout, service upgrades, and faster overseas expansion.
At the Auto China 2026, Dongfeng Nissan unveiled the NX8—a dual-power EV and range-extender SUV from its N series—alongside its main new-energy and internal combustion lineup, officially entering the "Joint Venture New Force 2.0" phase. Zhou Feng, vice president of Dongfeng Motor Corporation, stated: "The essence of the Joint Venture New Force is an underlying evolution in customer-centric thinking. We insist on being in China, for China, continuously evolving with Chinese teams, technology, resources, and speed."
More noteworthy is that Nissan is systematically learning "Chinese-style tactics." Tatsuzo Tomita, head of Nissan's "Total Delivery Cost" (TdC) department, publicly stated the company has "mastered Chinese-style operational methods" and is pushing to apply them to actual business, particularly to solve the core challenge of "adapting parts production for existing and future models."
This isn't a simple procurement adjustment; it is a comprehensive "benchmarking" of China's supply chain management model.
Then there is Honda. While lagging behind Toyota and Nissan in shifting to Chinese supply chains, Honda has begun to act.
In May 2026, Honda formally announced a strategic adjustment, explicitly planning to adopt a large volume of standardized local Chinese parts and apply local Chinese technology directly in new fields. Crucially, Honda decided to leverage platforms from Chinese partners (GAC and Dongfeng) to launch new-energy products.
Image source: Screenshot from Honda China official website
This shift means Honda, whose pure EV sales in China have been sluggish (totaling fewer than 300 units in February 2026 and less than 20,000 over the past 12 months), is finally following in the footsteps of Toyota and Nissan.
This also confirms a conclusion from another angle: in today's Chinese market, pure electric models can hardly gain a foothold without turning to Chinese supply chains and R&D systems. Even former global giants must learn "Chinese-style survival."
Deeper changes are happening at the R&D level.
Toyota has transferred decision-making power for China-exclusive models from its Japanese headquarters to local teams. Centered on the Toyota China R&D Center, the company built a new "China ONE R&D" system. Chinese engineers now lead the development of strategic models like the new Highlander and Sienna, completely overturning the past model where "Japan defined the product, and China adapted it."
Meanwhile, GAC Toyota announced a partnership with Huawei, Xiaomi, and Momenta to build a new AI ecosystem. The Bozhi 7 will debut the HarmonyOS cockpit, integrating Huawei motors and the Xiaomi ecosystem...
This goes beyond procurement changes; it is a transfer of R&D leadership and product definition rights.
Why Chinese Suppliers?
So, are these changes short-term adjustments or a long-term trend?
Zhou Xiaoying, CEO and editor-in-chief of Gasgoo, believes this is a long-term trend, not a simple short-term cost-cutting move. "The price war is just an accelerator. The deeper reason is that Japanese automakers need a supply chain system that is faster, more open, and more cost-competitive for their electrification and intelligent transformation. The previously closed Keiretsu supply chain can no longer adapt to the speed and efficiency of the Chinese market. Once opened, it is irreversible."
Indeed, Japanese automakers are not charities. Their shift to Chinese parts is simple: they work better.
First is cost. Industry data shows Chinese parts makers are 30% to 40% cheaper than their Japanese counterparts. In the auto industry, that is a life-or-death difference. Reports indicate that in 2022, the price gap between BYD and Toyota's EVs was about 2 million yen, and 3 million yen for Nissan's—a massive chasm. With the launch of the bZ and N series, that gap narrowed to about 200,000 yen (roughly 10,000 yuan) by 2025. While a gap remains, it at least kept Japanese cars "barely on the competitive stage," securing a chance to survive.
Second is efficiency. Chinese firms take about 10 months from order to mass production, while Japanese firms usually need over 18 months. In a Chinese market where NEV refresh rates are measured in months, this time lag implies a half-generation gap. As the Toyota bZ3X moved from planning to production far faster than traditional cycles, the response efficiency of the Chinese supply chain is reshaping industry standards.
Image source: 699pic.com
But what is truly making Japanese suppliers nervous is the third advantage: quality.
In the past, Japanese suppliers' biggest moat was "precision" and "reliability." The long-held view was that Chinese parts were cheap but quality was unstable. That perception is being rapidly overturned.
Costs 30-40% lower, speed nearly doubled, quality on par. Facing this combination, no rational procurement manager can refuse.
Zhou Xiaoying emphasizes that Chinese suppliers' advantage isn't just low cost, but a systemic capability combining "cost, speed, engineering response, and industrial synergy." "What is truly hard to replicate is China's complete new-energy and intelligent industrial ecosystem, and the engineering experience brought by high-frequency iteration. Single cost advantages can be chased, but systemic efficiency and scenario accumulation build longer-term barriers."
If the rise of Chinese suppliers is the hand pushing the door open, the Japanese automakers' own "Keiretsu" system is the heavy threshold.
Built over half a century, this system was once the Japanese auto industry's strongest moat. Toyota, Denso, Aisin, and other core suppliers cross-held shares and were deeply bound, forming a closed ecosystem outsiders couldn't penetrate. In this system, trust and relationships mattered more than price and efficiency.
But in the electric era, this former advantage has become a constraint everywhere.
The pain of transition is real. As Toyota and Nissan increase Chinese parts procurement, Japanese parts suppliers that once relied on these automakers are losing orders one after another. NHK SPRING Co.,Ltd. decided to liquidate its seat subsidiary in Hubei and sales company in Guangdong; major wiring harness maker Yazaki has decided to phase out its factory in Guangdong.
The deeper anxiety is that these Japanese suppliers are discovering their past reliance—their dependency on Japanese automakers—is no longer a protective charm.
Zhou Xiaoying notes that the biggest dilemma for Japanese suppliers is that their past model of relying on stable customer relationships and incremental improvements is being broken by a rapidly iterating market. The most urgent reform is shifting from a closed supporting system to an open competitive one, improving decision speed, cost elasticity, and local R&D capabilities—especially by embedding deeper into the Chinese market.
Some Japanese firms are already finding new paths. Although Toyota Gosei lost the bZ3X order, it turned around and secured an airbag order from IM Motors. Honda's Musashi Seimitsu Industry has begun supplying suspension and steering parts for BYD's MPVs. Such flexible adjustments may represent the survival path for Japanese suppliers in this new era.
After the Window Opens
For Chinese parts enterprises, this is a historic strategic window.
This supply chain restructuring isn't limited to China. Toyota has made it clear it plans to expand the use of Chinese parts to its Southeast Asian production bases. According to the *Nikkei*, Toyota will procure parts from Chinese manufacturers at its largest Southeast Asian base in Thailand and apply them to new EVs produced there starting in 2028.
More specifically, Toyota recommended Chinese interior material manufacturer Yuefei New Materials to the Thai parts giant Summit Group. The two companies established a joint venture in Thailand in January 2025, planning to build a local factory to supply parts to Toyota. This is seen by the industry as the first time a Japanese auto giant has spearheaded the entry of a large Chinese parts firm into the local market.
Toyota also plans to launch new models in Southeast Asia as early as 2028, adopting a "multi-path new-energy platform" suitable for pure electric, hybrid, and other power systems. Using Chinese parts, the goal is to reduce costs by 30% compared to the past.
This is a critical moment for Chinese suppliers moving from "substitution" to "symbiosis."
But behind the opportunity, risks are equally real. Once Japanese automakers complete their supply chain adjustment and restore cost competitiveness, will they erect new barriers? When the share of Chinese parts in the Japanese system hits a critical point, will it trigger concerns over "supply chain security"? These risks are real.
Therefore, the ideal state has never been to replace Japanese suppliers, but to form a new pattern of "Sino-Japanese complementarity." Chinese firms provide core electrification and intelligent components, while Japanese firms retain traditional strengths in precision manufacturing and chassis tuning. This symbiotic relationship is far more sustainable than simple substitution.
The window won't stay open forever. When Japanese automakers finish their supply chain reconstruction and their traditional suppliers truly awaken, today's advantages could be fleeting. What Chinese suppliers must do is not wait for handouts from Japanese automakers, but to build irreplaceable technical barriers and depth of cooperation during this window.
That is true long-termism.
