Studies in Regional Science, Vol. 43, No.

Economic 2, 2013,
Impacts 259-270.
of Hybrid and Electric Vehicles in Japan and China 259

Economic Impacts of Hybrid and Electric Vehicles in Japan and China :

National and Multi-Regional Input-Output Applications

Hiroyuki Shibusawa* and Zhang Xu**

Abstract
This paper examines the economic impacts of technological innovations in the motor vehicle industry in
Japan and China. The motor vehicle industry has developed environmentally friendly vehicles in the face of
concerns over global warming and petroleum exhaustion. A new type of motor vehicle will likely become
popular, and the industrial sector be affected by its appearance. Since the Japanese economy heavily
depends on the motor vehicle industry, the advent of a new age in the automotive industry will have a signifi-
cant impact not merely on the motor vehicle industry, but on other industries as well. Meanwhile, in China,
the motor vehicle industry is rapidly expanding, and environmentally friendly vehicles have recently come
into use. In this study, we explored the economic impacts of a shift in the production system of the motor
vehicle industry from conventional technology to electric and hybrid vehicle technology. The automotive
industries in China and Japan are mutually dependent on the availability of technology and resources in each
country. Therefore, it is also important to examine how best to build a relationship of competitive coexis-
tence between the two nations, and this paper estimates the economic impacts of changes in China-Japan
trade in the automotive industry.

JEL Classifications : R11, R15, R41

Keywords : Electric and Hybrid Vehicles, Technological Innovation, China-Japan Trade, Input-Output Analy-
sis, Economic Impacts

1. Introduction
China is a superpower in terms of the world’s automobile market. In 2010, for example, China’s auto-
mobile production accounted for approximately 34% of the world total. The Japanese automobile industry,
meanwhile, is shifting to the production of next-generation vehicles such as hybrids and electric vehicles. In
this study, focusing on the development of the next-generation automotive industry in Japan and the growth of
the automotive industry in China, we investigate the characteristics of the automotive industries in both coun-
tries through the use of their respective input-output tables. Focusing on the economic impacts of the rise
of hybrid and electric vehicles as the next-generation of automobiles, we perform a comparative analysis of
the respective industries in China and Japan. After China’s entrance into the WTO, China-Japan trade has
intensified. Moreover, the automotive industries in China and Japan are mutually dependent on the availabil-
ity of technology and resources in each country. Thus, it is important to examine how best to build a rela-
tionship of competitive coexistence between the two nations. We therefore estimate the economic impacts
caused by a change in the relationship of interdependency between the automotive industries of the two coun-
tries, using the Asian inter-national and inter-regional Input-Output Table.

* Department of Architecture and Civil Engineering, Toyohashi University of Technology, hiro-shibu@tut.jp, Cor-
responding Author
** NEC
Received : 18th July, 2012 Accepted : 27th June, 2013
Ⓒ日本地域学会 (JSRSAI) 2013

259
 260 Hiroyuki Shibusawa and Zhang Xu

The next generation vehicle would have an economic, social and environmental impact in many
areas. In the world, developed and developing counties, there are many discussions on the impacts of the
envirometally friendly vehicle production and utilization stage. Granovskii, Dincer and Rosen [6] evaluated
economic and environmental indicators for vehicle production and utilization stage by performing a compari-
son of four kinds of vehicle : conventional, hybrid, electric and hydrogen fuel cell. Scott et al. [17] assessed
the life-cycle cost (LCC) of private vehicle transportation for Plug-in Hybrid Vehicle (PHEV) users and com-
pared it with the LCC for conventional light-duty vehicles in USA. Crist [4] compared the lifetime costs of
internal combustion engine powered cars and battery electric vehicle in France. Kampman et al. [8] analyzed
the economic impacts of electric vehicles and the role that government policies and business models can play
to make the economics more attractive to potential owners and users in Europe. Ustaoglu and Yildiz [21]
examined the expected consumer demand for the electric vehicles, the market share, and the contribution to
the foreign trade valued of Turkey. Nakata [16] examined the impact of hybrid vehicles for passenger trans-
portation on carbon emission using a partial equilibrium model and showed that hybrid vehicles are more effi-
cient in reducing carbon dioxide than conventional vehicles.
Government incentives for environmental friendly vehicles have been established by many coun-
tries. In Japan, the first project for the green vehicles was introduced in 1998. The recent program which
is Green Vehicle Purchasing Promotion Measure in 2009 provides subsidies and tax discounts for purchasing
environmental friendly and fuel efficient vehicle (“Eco-cars”). Since 2010, the Ministry of Economy, Trade
and Industry (METI) established the “Next-Generation Vehicle Strategy 2010” (METI [13]). In China, the
electric bike is more popular vehicle and the boom of the electric bikes started from 1998 (Cherry and Cer-
vero [3]). Chinese government started a policy to support the research activities of new energy vehicle by
introducing the “863” plan since 2001 (Lin [19]). In 2009 and 2010, the Chinese government introduced sev-
eral programs to provide incentives for purchasing electric vehicles (Yang [22]).
The development of green vehicles with electric motors raises issues relating the environment, energy,
and industry (Wells [23]). However, there are few attempts to analyze the impacts of the new green technol-
ogy and technology transfer related future vehicles on the industrial structure and the regional economy. In
Japan and China, the next-generation vehicles will bring an economic impact on industries in each coun-
try. Our objective is to evaluate the impacts of changes in production technology of the automobile sector in
Japan and China. The impact of the international diffusion of a new technology is also examined.

2. Methodology
(1) The model
Input-output analysis, originally designed by W.W. Leontief, utilizes input-output tables to measure the
effects of economic policy and economic projections. The model equation for a given competitive import
type is formulated as (Leontief [9]) , where X is the vector of gross out-
put, interpreted as the output induced by the final demand and exports ; A is the input coefficient matrix and
Mr the diagonal import share coefficient matrix (both directly derived using an input-output table) ; F is the
vector of final demand ; E is the vector of exports ; and I is an identity matrix.
In this paper, the appearance of next-generation vehicles is regarded as a change in the structure of pro-
duction in the automotive industry (International Science Foundation [7] ; Shibusawa and Sugawara
[18]). The introduction of a new technology into the automobile production process is regarded as a change
in the input structure of the automotive industry. In the input-output framework, this is represented by a
change in the input coefficient matrix : A " Acase . If the automotive industry, impacted by a new technology,
produces a new type of motor vehicle to satisfy the final demand DF , and exports DE , then the economic
impact DX is calculated as DX = 6 I-^ I-M r h Acase@-1 6^ I-M
r h DF+DE@.

(2) Impacts of an expansion of China-Japan trade in the automotive industry

The inter-regional input-output approach has two variants : the Isard approach, known as the inter-
regional input-output model ; and the Chenery-Moses approach known as the multi-regional input-output
 Economic Impacts of Hybrid and Electric Vehicles in Japan and China 261

model. In this study, we adopt the Chenery-Moses type, which enables us to parameterize the inter-regional
trade patterns between China and Japan. A change in the inter-regional trade in a certain industry related to
automotive production will be simulated by changing the inter-regional trade coefficients. The Chenery-
Moses equation is formulated as X = 8 I-TA-M t ^T)A hB-1 8TF-M
t ^T)F h+EB, where X is the vector of the
gross output ; T is the matrix of the inter regional trade coefficients, and A the diagonal block matrix of the
-

regional technical input coefficients (both derived from a multi-regional input-output table) ; F is the vector
of the final demand, and E the vector of exports (both exogenously given) ; M t is the diagonal import share
coefficient matrix ; and the symbol * means that the given matrix takes a diagonal block form.
A change in the inter-regional trade coefficients of a particular industry, for a particular pair of regions in
China and Japan, can be estimated as T " Tcase . If a particular industry in a specific region produces goods to
satisfy the final demand DF and exports DE according to given inter-regional trade coefficients, then the out-
put induced by the demands DX is calculated using the following formula :
DX = 8 I-Tcase A-M t ^T case
)
A hB 8Tcase DF-M
-1
t ^T case
)
DF h+DEB.

3. Impacts of the appearance of next-generation vehicles at national level

(1) Data
Our input-output analysis for China utilizes the National Input-Output Table for 2007, issued by the
China National Statistical Bureau ([1]). This input-output table is composed of 135 sectors. Table 1 shows
the production sectors related to next-generation automobiles. The “Manufacture of automobiles” sector
assembles a vehicle using automobile parts. In addition to passenger cars, buses and trucks also are included
in this sector. The “Rolling of steel” and “Manufacture of other transport equipment” sectors produce auto-
mobile parts. These are characterized as upstream industries for the conventional (internal combustion)
automobile. If the “Manufacture of automobiles” sector produces next-generation vehicles such as hybrid or
electronic cars, the “Manufacture of generators” and “Manufacture of other electrical machinery and equip-
ment” sectors would play a significant role in the automobile supply chain. Here, we assume that the “Man-
ufacture of generators” sector provides an electric motor to the “Manufacture of automobiles” sector, in order
to produce a hybrid vehicle (HEV) or an electronic vehicle (EV). Similarly, it is assumed that the “Manufac-
ture of other electrical machinery and equipment” sector produces a secondary battery for the next-genera-
tion vehicles.
For Japan, the National Input-Output Table (base table) of the Statistics Bureau (2005 producer price
table, 520 columns×407 rows [12]) is utilized. The detailed sectors are aggregated into an input-output
table with 111 sectors, for our analysis. Table 2 shows the production sectors related to next-generation
automobiles in Japan. Six sectors—“Motor vehicles”, “Trucks, buses and other vehicles”, “Two-wheeled
vehicles”, “Motor vehicle body”, “Engine and parts” and “Motor vehicle parts”—produce conventional vehi-
cles. In the production process of next-generation vehicles, the “Heavy electrical equipment” sector pro-
duces motors and the “Other electronic products” sector produces batteries.

Table 1. Sector list for next-generation vehicles in China

Sector name Production process

Manufacture of automobiles Assembling parts

Rolling of steel
Producing parts
Manufacture of other transport equipment

Manufacture of generators Producing motors for HEV/EV

Manufacture of other electrical machinery and

Producing batteries for HEV/EV
equipment
 262 Hiroyuki Shibusawa and Zhang Xu

Table 2. Sector list for next-generation vehicles in Japan

Sector name Production process

Motor vehicles

Trucks, buses, other vehicles Assembling parts

Two-wheeled vehicles

Motor vehicle body

Engine and parts Producing parts

Motor vehicle parts

Heavy electrical equipment Producing motors for HEV/EV

Other electronic products Producing batteries for HEV/EV

(2) Scenarios
We set out three cases : “Base”, “HEV”, and “EV”. In the Base case, the automotive sector (“Manu-
facture of automobiles” in China, and “Motor vehicles” in Japan) produces only conventional vehicles fueled
by gasoline. In the HEV case, the sector produces only hybrid vehicles fueled both by gasoline and electric-
ity. In the EV case, the sector produces only electric vehicles. In our simulation, economic impact will be
measured in terms of new demand (including household consumption, exports, etc.) for automotive industry
products, in one-unit (1 trillion yen) increments.
In the Base case, we use the input coefficients of the original input-output table (Abase). In the EV and
HEV cases, the input coefficients of hybrid and electric vehicles (AHEV, AEV) are estimated on the basis of the
previous literature and published data (The Institute of Energy Economics [20]). Consider, for example, a
situation where the automotive sector produces only electric vehicles. In this case, we could increase the
input coefficients of the sectors producing secondary batteries and electric motors ; and likewise, we could
assume that the input coefficients of the conventional automotive parts sectors would be reduced (see Table
A-1 and A-2 in Appendix).

(3) The results of the simulation

The economic impacts (specifically, the total of induced products) are measured according to the details of
the three cases. Table 3 shows the results of the economic impacts resulting from an increased demand for
automobiles. In the case of China, for an increased demand of 1 trillion yen, in the Base scenario the total of
induced products is calculated as 2.9 trillion yen in China ; in the HEV case, 3.02 trillion yen ; and in the EV
case, 2.79 trillion yen. If the impact of the Base case is normalized as 100%, then the HEV case is 101.24%,
and the EV case 95.26%. On the other hand, in the case of Japan, for the same increase in demand, the Base
case impact is calculated as 2.94 trillion yen, and the HEV and EV cases as 2.98 trillion yen and 2.8 trillion
yen, respectively. It should be noted that the definition of the automotive sector in China is slightly different
than that of Japan. The automotive sector in China produces passenger vehicles, buses and trucks, but the
automotive sector in Japan produces only passenger vehicles. The overall sector value ranges from 2.79 to
3.2 over the three cases, and there is no significant difference between the values for China and Japan. The
automotive sector in China may reach the same level as that of Japan in terms of economic impact. In the
case of the production of hybrid vehicles, since both a motor and secondary battery must be installed in a
next-generation vehicle, increased input from those sectors would result in impacts across a broader range of
industries. On the other hand, in the production of electric vehicles, since an internal combustion engine is
not installed, there would be a negative impact on all related sectors. It is noteworthy that, in the case of
gasoline vehicle production, there is no significant change between China and Japan. China’s automobile
industry is rapidly growing and its industrial structure may yet resemble that of Japan. Finally, we may
 Economic Impacts of Hybrid and Electric Vehicles in Japan and China 263

Table 3. Economic impacts of next-generation vehicles in China and Japan

China Japan

Inducement Inducement
Case Type of vehicle : Technology Ratio Ratio
coefficient coefficient

Base Conventional vehicle : Abase 2.90 100.00% 2.94 100.00%

HEV Hybrid vehicle : AHEV 3.02 104.23% 2.98 101.24%

EV Electric vehicle : AEV 2.79 96.19% 2.80 95.26%

(a) China (b) Japan

Figure 1. Positive impact from the production of electric vehicles

observe that the economic impact of gasoline vehicle production in Japan is slightly greater than in China, but
in the case of hybrid vehicle production, the impact in China is greater than in Japan.
We are analyzing the economic impact, on each sector, of increased demand for new types of vehi-
cles. Here, we compare the induced products of each sector in the Base case with those of the EV case. It
is expected that the shift in emphasis from gasoline to electric power will impact the broader industrial struc-
ture. The question arises as to which industries will be positively (or negatively) impacted by shifting pro-
duction from conventional to electric vehicles. In this analysis, some sectors which have been directly
affected in terms of the input coefficients of Tables 1 and 2 are not treated, because they would obviously be
affected by the impact of the new technology. Figure 1, then, shows the sectors experiencing a positive
impact from the production of electric vehicles. The vertical axis in Figure 1 represents the difference
between the HEV and Base cases (i.e., the value = induced outputs in the EV case − induced outputs in the
Base Case). From this figure, the “Smelting of Non-ferrous and Manufacturing of alloy” and “Rolling of non-
ferrous metal products” sectors in the case of China, and the “Plastic products”, “Nonferrous metals smelting
and refinement” and “Research” sectors in the case of Japan, are positively affected by the production of elec-
tric vehicles. These are regarded as sectors which produce parts for electric motors and rechargeable bat-
teries.
Figure 2 shows the sectors experiencing a negative impact from the production of electric vehicles ;
among them, the “Manufacture of pump, valve and similar machinery”, “Steel making” and “Manufacture of
rubber” sectors in the case of China, and the “Commerce”, “Steel materials” and “Cast products” sectors in
the case of Japan. These are regarded as sectors involved in the production process of internal combustion
engines and related transmission parts.
 264 Hiroyuki Shibusawa and Zhang Xu

(a) China (b) Japan

Figure 2. Negative impact from the production of electric vehicles

4. Impacts of the diffusion of the next-generation vehicles between Japan and China
(1) Data
To extend our analysis to the international impacts of the next-generation vehicles, the International
Input-Output Table between Japan and China for 2007, issued by the Ministry of Economy, Trade and Industry
[14], is utilized. This table has the trade data between 2 countries (Japan and China) and 77 production sec-
tors. Relating the next-generation vehicle, 3 production sectors are recognized, i.e., “Motor Vehicle”,
“Motor vehicle parts”, “Heavy electrical equipment/Other electronic products”. The inter-regional input-
output table is converted to a multi-regional input-output table, which allows us to observe economic impacts
of a technological change in a specific region, i.e. Japan or China.

(2) Scenarios
The same story in the previous section is applied, however the change in the regional technical coeffi-
cients in a specific country is considered (see Table A-3 in Appendix). In the Base case, both the automotive
sectors in Japan and China produce only conventional vehicles (CVs). In Case 1, the automotive sector in
Japan produces only HEVs but China produces only CVs. In this case, the technical coefficients in Japan are
only changed. In Case 3, both the automotive sectors in Japan and China produce HEVs. This scenario
partly would reflect a diffusion of the next-generation vehicle’s technology from Japan to China. Cases 4, 5
and 6 would indicate a diffusion step of the electric vehicles from Japan to China. In this section, an eco-
nomic impact is also measured in terms of new demand for automobiles in one-unit increments in both Japan
and China.

(3) Results of the simulation

Table 4 shows the results of the economic impacts resulting from an increased demand for automobiles in
Japan and China. In Base case, the total of induced products in both Japan and China is calculated as 2.822
with share 1.624 in Japan and 1.198 in China. Compare with the impacts, 2.90 in China and 2.92 in previous
analysis, the coefficient is mostly the same level but slightly decreased. As shown in Case 2 and Case 3, if
Japan or China produces HEVs, the coefficient increases by 2.873 or 2.874 respectively. If both the countries
produce HEVs only, the inducement coefficient reaches 2.925. In the case of the EV, Case 5 and Case 6 show
the coefficient becomes 2.761 and 2.798. If both the countries produce EVs, the coefficient declines 2.737.
 Economic Impacts of Hybrid and Electric Vehicles in Japan and China 265

Table 4. Economic impacts of next-generation vehicles between Japan and China

Type of Vehicle : Technology Inducement Share of Impacts

Case
Japan China Coefficient Japan China
Japan China
Base CV      : A CV CV      : A CV 2.822 1.624 1.198
Japan China
Case 1 HEV : A HEV CV      : A CV 2.873 1.654 1.219
Japan
CV      : A
China
Case 2 CV HEV : A HEV 2.874 1.627 1.246
Japan
HEV : A
China
Case 3 HEV HEV : A HEV 2.925 1.658 1.267
Japan China
Case 4 EV      : A EV CV      : A CV 2.761 1.529 1.232
Japan
CV      : A
China
Case 5 CV EV      : A EV 2.798 1.625 1.173
China China
Case 6 EV      : A EV EV      : A EV 2.737 1.530 1.207

Figure 3. Regions of China and Japan (ref. [5])

5. Impacts of an expansion of China-Japan trade in the automotive industry

(1) Data
The Transaction Interregional Input-Output Table between China and Japan for 2000 [5], issued by the
Institute of Developing Economies, Japan External Trade Organization, is utilized in our analysis of China-
Japan trade. This is an inter-national and inter-regional input-output table composed of 18 regions and 10
sectors (7 regions of China, 8 regions of Japan, ASEAN, East Asia, and the U.S.A). China is further divided
into 7 regions (1 Northeast (Dongbei), 2 North-China (Huabei), 3 East-China (Huadong), 4 South-China
(Huanan), 5 Central-China (Huazhong), 6 North-West (Xibei), and 7 South-West (Xinan)) ; and Japan into 8
regions (1 Hokkaido, 2 Tohoku, 3 Kanto, 4 Chubu, 5 Kinki, 6 Chugoku, 7 Shikoku, 8 Kyushu and Oki-
nawa). The geographical maps of China and Japan are shown in Figure 3. The table’s 10 production sectors
are : 1 Agriculture, livestock, forestry and fishery, 2 Mining and quarrying, 3 Household consumption prod-
ucts, 4 Basic industrial materials, 5 Processing and assembling, 6 Electricity, gas and water supply, 7 Con-
struction, 8 Trade, 9 Transportation, 10 Services. The inter-regional input-output table is converted to a
multi-regional input-output table, which allows us to observe economic impacts of a change in China-Japan
trade on the production sectors in China, Japan and other countries. In this table, the automotive industry is
 266 Hiroyuki Shibusawa and Zhang Xu

not classified as a distinct sector but included in the 5th sector, “Processing and Assembling”. As a prelimi-
nary analysis, we here attempt to evaluate the economic impacts of an expansion of China-Japan trade on the
processing and assembling sector, which is closely related to the automotive industry.

(2) Scenario
In our scenario, we focus on major economic regions in China and Japan : in China, Huabei (including
Beijing), Huadong (Shanghai) and Huanan (Guangzhou) ; and in Japan, Kanto (Tokyo), Chubu (Nagoya) and
Kinki (Osaka). Many factories and companies concerned with automobiles, parts or assembling and process-
ing are concentrated in these regions. Our question is, if transactions related to the automotive industry
increase among these regions, how will the respective regional outputs be affected. The Chinese govern-
ment has adopted an aggressive economic development policy in the three regions concerned ; and as such,
these regions have priority over other regions in terms of economic growth in China. As a result, they have
experienced rapid growth in recent years, including the automotive industry, which is concentrated in these
regions. The regions are thus expected to become major factors in the automotive trade, along with the
major economic regions of Japan. In order to satisfy the needs of the globalized market of the automotive
industry, Japan has been exporting automobiles and parts from its major economic regions to China and other
countries. For example, Toyota Motor Corporation and its related companies are located in the Chubu
region, and automobiles and parts are also exported from international ports in the same region. As a pre-
liminary analysis, we here attempt to evaluate the economic impacts, on our targeted regions, of an expansion
of China-Japan trade in the processing and assembling sector, which includes the automotive sector. More
data and information may be required if we are to focus specifically on the automotive industry in China and
Japan.
For our simulation, we established two cases : Case 0 and Case 1, and calculated the induced products in
each region when the demand for “Processing and Assembling” in a given region increases by one unit. An
initial shock is felt by only one sector in a given region. In Case 0, the economic impacts are calculated using
the original input-output table.
In Case 1, an expansion of China-Japan trade in the “Processing and Assembling” sector is assumed to be
reflected in this sector’s trade coefficients for respective regions in the two countries. We further assume
that an expansion of China-Japan trade is offset by a reduction of domestic trade within China and Japan. In
our simulation, this situation is expressed by reducing the domestic trade coefficients between the three
major economic regions in Japan and China by 1% ; and at the same time, increasing the trade coefficients of
imports or exports among the same three regions in China and Japan. Figure 4 shows an explanatory exam-
ple of transactions between major economic regions in China and Japan, with a focus on the Huabei
region. The “Processing and Assembly” sector in Huabei region accounted for 79.1% from its own
region. The demand for imported goods in Huabei is 1.3% from Huanan, 5% from Huadong, 1.7% from
Kanto, 0.8% from Kinki, and 0.5% from Chubu. In our simulation, the domestic trade in China is converted
to international trade from Japan to China ; in this example, the value equal to 1% of the domestic trade coef-
ficients between the three regions in China, (79.1+1.3+5)*0.01=0.854%, is converted into China-Japan
trade. This means that the trade coefficients of imports in Huabei, from the three regions in Japan, increase
by 0.854%/3 regions=0.28%. In the same way, all domestic trade between the three regions in China and
Japan is converted into international trade between China and Japan, by reducing the domestic trade coeffi-
cients and increasing the international trade coefficients. The former reduction is simply offset by the latter
increase. In Case 1, the economic impacts are calculated by using the adjusted trade coefficients (see Table
A-4 in Appendix).

(3) The results of the simulation

Figure 5 summarizes the output induced in each region when we postulate an initial shock in demand for
“Processing and Assembling” in a target region. By increasing demand by one unit in a given target region
over all 13 regions, we can determine which region exerts the greatest influence over the other regions. In
 Economic Impacts of Hybrid and Electric Vehicles in Japan and China 267

Figure 4. Trade coefficients for the “Processing and Assembling” sector between major economic regions of
China and Japan, with a focus on Huabei

Figure 5. Induced production as a result of increased demand for Processing and Assembling

Figure 5, the X-Y axes means that a target region with an initial demand shock and a region which induced
output. The figure suggests that increasing the demand in a given region of China results in a large propor-
tion of self-induced local production, while a similar increase in Japan impacts other domestic regions. We
can see that the mutual economic inter-regional dependence of Japan is greater than that of China, probably
owing to the fact that Japan is geographically more compact than China and has better transportation infra-
structure.
The economic impacts of an expansion of China-Japan trade are summarized in Table 5. In Case 0 and
Case 1, the resulting induced production in each region is calculated according to an increased demand of one
 268 Hiroyuki Shibusawa and Zhang Xu

Table 5. Economic impacts of an expansion of China-Japan trade

Induced production by region

North- East- South-

China China China Kanto Chubu Kinki
(Huabei) (Huadong) (Huanan)

North-China 98.6% 98.5% 99.0% 114.1% 133.1% 123.3%

East-China 98.6% 98.7% 98.9% 109.50% 122.5% 115.5%

Region
South-China 99.0% 98.8% 98.9% 103.50% 108.7% 106.2%
experiencing
a one-unit increase Kanto 206.4% 154.9% 147.9% 98.8% 98.6% 98.8%
in demand
Chubu 267.9% 192.2% 184.6% 98.6% 98.7% 98.7%

Kinki 178.1% 138.7% 133.3% 98.7% 98.7% 98.9%

Note : ratio=(induced production in Case 1/induced production in Case 0)*100%

unit in the given target region. Table 4 shows the difference in regional economic impacts between Case 0
(without an expansion of China-Japan trade) and Case 1 (with an expansion of China-Japan trade). The eco-
nomic impacts of Case 0 are normalized as 100%. We further focus on six major economic regions (Huabei,
Huadong and Huanan in China ; and Kanto, Chubu and Kinki in Japan).
To take an example, in Case 1, if Huadong experiences a one-unit increase in demand in the “Processing
and Assembling” sector, induced production in Huabei, Huadong and Huanan drops to 98.6%, 98.7% and
98.9%, respectively. On the other hand, the induced output in Kanto, Chubu and Kinki rises to 109.5%,
122.5% and 115.5%, respectively. On the other hand, if the same increase in demand is experienced by
Chubu, then output in Huabei, Huadong, and Huanan rises to 267.9%, 192.2% and 184.6%, respectively, and
that in Kanto, Chubu and Kinki drops to 98.6%, 98.7%, and 98.7% respectively. The table suggests that
increased regional demand for “Processing and Assembling” in Japan results in comparatively greater regional
economic benefits in China.

6. Conclusion
Two general trends are observable in the automotive industry in China and Japan : the emergence of
next-generation vehicles, and trade liberalization between China and Japan. In this paper, we have assessed
the economic impacts of the appearance of environmentally friendly vehicles such as hybrid and electric cars,
and an expansion of China-Japan trade, by utilizing the input-output tables of China and Japan. The overall
economic impact in China of a one-unit increase in demand for automobiles at national level is calculated to be
2.9 (trillion yen) in the Base case, 3.02 in the HEV case, and 2.79 in the EV case ; while in Japan it is 2.94 in
the Base case, 2.98 in the HEV case, and 2.8 in the EV case. In comparison to the Base case, in which the
automotive industry produces conventional vehicles, the HEV case has a positive impact, and the EV case a
negative impact, on the Chinese economy. The model is extended to analyze the international spillover
effects between Japan and China. It is shown that the international spillover effects are more significant in
the case of the EV production rather than conventional and hybrid cars.
We also conducted a preliminary simulation analysis of an expansion of China-Japan trade, focusing on
the major economic regions in China and Japan. This suggested that, assuming greater transactional activity
in the “Processing and Assembling” sector between China and Japan, increased demand for “Processing and
Assembling” in Japan would result in comparatively greater economic benefits to China.
The new-generation vehicle is a growing market in the world. Japan has a leading country of the next-
generation vehicle. China’s automotive market has the most growth potential in the world. This study
shows the economic impacts of the new technology with related the next-generation vehicle and the feedback
effects of between two countries, China and Japan. Governments should support growing industries which
 Economic Impacts of Hybrid and Electric Vehicles in Japan and China 269

develops new technologies toward upgrading of next generation vehicles. In order to realize the sustainable
automotive industry, policies and measures such as support for technology development, support for green
vehicles in terms of alternative fuels, support for inward investment, and trade agreement with countries and
regions, should be implemented continuously.
Our future work will improve the accuracy of the simulation by utilizing the latest input-output tables
incorporating the latest technology and information. It is also important to extend our model and compara-
tive analysis to the automobile industries in the three countries of Korea, Japan and China, and to analyze the
economic effects of car use and technological progress during the developmental period of next-generation
vehicles.

References
［ 1 ］ China Statistical Bureau, National Input-Output Table for 2007, 2009.
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Appendix
The input coefficients of base, HEV and EV cases in China and Japan are shown in Table A-1 and Table
A-2 respectively.

Table A-1. Input Coefficients in Chinese Input-Output Model.

Sector Base HEV EV

Automobiles 0.1433 0.1000 0.1000

Rolling of steel 0.1511 0.1500 0.0000
Other transport equipment 0.3088 0.3000 0.3000
Generators 0.0196 0.0400 0.0204
Other electrical equipment 0.0117 0.1000 0.0883

Table A-2. Input Coefficients in Japanese Input-Output Model

Sector Base HEV EV

Motor vehicle body 0.1433 0.1000 0.1000

Engine and parts 0.1511 0.1500 0.0000
Motor vehicle parts 0.3088 0.3000 0.3000
Heavy electrical equipment 0.0196 0.0400 0.0204
Other electronic products 0.0117 0.1000 0.0883

Table A-3. Input Coefficients in Multi-Regional Input-Output Model between Japan and China

Japan China
Sector
Base HEV EV Base HEV EV

Motor vehicle parts 0.3779 0.3248 0.1748 0.2949 0.2418 0.0918

Heavy electrical equipment / 0.0483 0.1570 0.2625 0.0131 0.1218 0.2273
other electric products

Changes in the trade coefficients in the case of trade expansion between China and Japan are shown in
Table A-4.

Table A-4. Changes in Trade Coefficients

North-China East-China South-China Kanto Chubu Kinki

North-China −0.0079 −0.0003 −0.0002 0.0025 0.0030 0.0025
East-China −0.0005 −0.0079 −0.0006 0.0025 0.0030 0.0025
South-China −0.0001 −0.0002 −0.0055 0.0025 0.0030 0.0025
Kanto 0.0028 0.0028 0.0021 −0.0054 −0.0026 −0.0030
Chubu 0.0028 0.0028 0.0021 −0.0012 −0.0052 −0.0018
Kinki 0.0028 0.0028 0.0021 −0.0010 −0.0011 −0.0029