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Japanese automakers are looking for ways to catch up with European and U.S. competitors in China, which has grown to become the world’s largest car market.

Around 2 million vehicles were sold in China in 2000, before the country joined the World Trade Organization. Sales have since grown over tenfold — to about 29 million units at their 2017 peak, or 1.6 times those of the United States.

Volkswagen AG was the first foreign automaker to enter the Chinese market, seeking to capitalize on its massive population. General Motors Co. and other Western companies soon followed, while Japanese makers were late to join.

Toyota Motor Corp. made its own wholehearted foray into the Chinese market in August 2002, when it formed a comprehensive tie-up with China FAW Group Co. By then, Volkswagen had 50% of the market share.

Although sales have been on a decline since 2018, China remains the world’s biggest automobile market. “There are more brands there than anywhere else, and competition is fierce,” a senior Mazda Motor Corp. official said.

Technology development is key to Japanese automakers catching up with their rivals as the Chinese government is rushing to promote new energy vehicles, including electric vehicles.

Nissan Motor Co. plans to increase the proportion of electrified vehicles among its Chinese car sales to at least 40% by fiscal 2026, which ends in March 2027. In China next year, Honda Motor Co. plans to release a vehicle with an advanced driving assist system.

Toyota sold 1.8 million units in China in 2020, or about 20% of the automaker’s global total.

While the proportion of sales in China is likely to increase for all automakers, a strong dependence on the Chinese market can also be disadvantageous as they face the risk of exposure to tensions between Washington and Beijing.

“Our position will become extremely tricky if we get caught up in a political issue,” an official at a major Japanese automaker said.

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