Profound Impact of Japan's Hydrogen Energy Strategy Failures on Technology Route Choices of Panasonic and Other Battery Enterprises

As an island nation with scarce global energy resources, Japan has long faced severe challenges to energy security. Since the oil crisis in the 1970s, Japan has been committed to exploring alternative energy paths. Entering the 21st century, the Japanese government positioned hydrogen energy as a core pillar of its national energy strategy, officially releasing the “Basic Hydrogen Strategy” in 2017, which was further revised in 2019 with the goal of making hydrogen energy the “ace” energy source for a decarbonized society [1].

The core objectives of this strategy are to achieve a hydrogen energy society by 2050, with hydrogen supply reaching 20 million tons and hydrogen accounting for 12% of terminal energy consumption. The Japanese government believes that hydrogen energy has advantages such as high energy density, fast refueling speed, and long range, and is regarded as a technical route that can challenge electric vehicles, especially in the automotive sector [2]. Japanese automakers like Toyota and Honda have invested heavily in hydrogen fuel cell vehicle research and development, while battery enterprises such as Panasonic also once focused on the fuel cell sector.

However, over a decade of strategy implementation, Japan’s hydrogen energy development has encountered severe challenges. By 2025, the global promotion of hydrogen fuel cell vehicles had almost completely collapsed, directly affecting the technical route choices and strategic layout of Japanese battery enterprises [3].

The Japanese government and enterprises overly focused on the hydrogen fuel cell technology route, ignoring the rapid iteration and cost reduction trend of pure electric vehicle technology. Major markets like China, Europe, and the US shifted to lithium battery-based pure electric technology routes in the mid-to-late 2010s, establishing complete industrial chains and infrastructure systems. When Japanese enterprises like Panasonic realized the problem, Chinese companies such as CATL and BYD had already built significant scale and technical advantages in the power battery sector [4].

Large-scale application of hydrogen energy relies on a sound hydrogen refueling station network. However, the construction cost of hydrogen refueling stations in Japan is extremely high (approximately 400-500 million yen per station), and operating costs are also high. According to CleanTechnica reports, the utilization rate of hydrogen fuel stations in Japan continued to decline in 2025; despite long-term government support, it still struggled to form a commercial operation model [3]. In contrast, the construction cost of charging piles is only one-tenth of that of hydrogen refueling stations, and they can leverage existing power infrastructure.

Japanese enterprises adopted a relatively closed technical standard system in the hydrogen fuel cell sector, which differs from international mainstream standards. This “insular” development strategy made it difficult for Japanese hydrogen fuel cell vehicles to enter international markets, while also hindering the entry of overseas technology and capital. Additionally, hydrogen production costs remain high (currently mainly relying on natural gas reforming), and large-scale commercial production of green hydrogen has not yet been realized, fundamentally restricting the economic viability of hydrogen energy [5].

Although the Japanese government invested heavily in supporting the demonstration operation of hydrogen fuel cell vehicles, the private consumer market was never effectively opened. Sales of hydrogen fuel cell models like Toyota Mirai and Honda Clarity were dismal, with global sales of less than 10,000 units in 2024. In contrast, pure electric models like Tesla Model 3 can achieve monthly sales of tens of thousands of units, showing a stark contrast in market acceptance [6].

As a globally renowned battery manufacturer, Panasonic invested a large amount of R&D resources in the fuel cell sector during the hydrogen energy strategy period. The company built multiple fuel cell production bases in Japan and formed a joint venture, Prime Planet Energy & Solutions (PPES), with Toyota. However, as the hydrogen fuel cell market continued to slump, Panasonic had to gradually adjust its strategic focus after 2023, shifting more resources to automotive power batteries and energy storage batteries—but by then, it had already missed the optimal expansion window [7].

In the power battery sector, the global market share of Japanese enterprises has continued to decline. According to industry data, Chinese enterprises accounted for six of the top ten global power battery installation volumes in 2024, with a combined market share exceeding 60%. CATL alone accounted for approximately 37% of the market share, while Panasonic’s ranking had fallen out of the top three, surpassed by South Korea’s LG Energy Solution and Samsung SDI [4]. If Japanese enterprises had chosen a more pragmatic lithium battery technology route initially, they could have avoided today’s passive situation with their technical accumulation in battery materials and manufacturing processes.

Japanese enterprises are not lacking technical capabilities in lithium batteries; the cylindrical batteries supplied by Panasonic to Tesla once represented the highest level of the industry. However, due to strategic wavering and the distraction of hydrogen energy, Japanese enterprises are significantly behind Chinese enterprises in vertical integration of the lithium battery industrial chain. Companies like CATL and BYD have established full industrial chain systems from lithium mining to battery recycling, while Japanese battery enterprises still rely heavily on external supply chains, restricting their cost control and capacity expansion [8].

The failure of Japan’s hydrogen energy strategy has brought huge sunk costs to related enterprises. Toyota, Honda, and other automakers have invested tens of billions of dollars in hydrogen fuel cell vehicle R&D, and the fuel cell business of Panasonic and other battery enterprises has also consumed a large amount of resources. These investments are difficult to recover in the short term, affecting enterprises’ investment capabilities in emerging technology fields. Meanwhile, the failure in the hydrogen energy sector may shake the confidence of investors and partners, increasing the difficulty of future financing and cooperation [9].

The lesson from Japan’s hydrogen energy strategy shows that overly forward-looking technical routes may be difficult to implement due to insufficient economy. Hydrogen energy does have advantages in specific application scenarios (such as heavy trucks, aviation, shipping, etc.), but in the passenger car sector, pure electric technology has already established significant cost and infrastructure advantages. Enterprises need to find a balance between technical ideals and commercial reality.

In the context of globalization, closed technical standard systems are difficult to achieve sustained success. The rapid rise of Chinese and European/American enterprises in the power battery sector benefits from open cooperation mechanisms and global industrial chain integration. Japanese enterprises need to re-examine their technical strategies, actively integrating into the global industrial ecology while maintaining core competitiveness.

Japan’s hydrogen energy strategy overly relied on government subsidies and industrial policy guidance, ignoring the cultivation of market demand. When policy support weakens or external competition intensifies, technical routes without a market foundation are difficult to sustain. Future new energy policy formulation should pay more attention to the role of market mechanisms, allowing technical routes to survive the fittest through competition.

The failure of Japan’s hydrogen energy strategy has had a profound negative impact on Panasonic and other battery enterprises. These impacts are not only reflected in the loss of market share and passive adjustment of technical routes but also deeply in the relative decline of the overall competitiveness of Japan’s battery industry. The Panasonic case warns us that in the rapidly iterating new energy sector, strategic choice is no less important than technical innovation itself. Enterprises need to seek a balance between technological foresight and commercial viability, avoiding repeating the mistakes of Japan’s hydrogen energy strategy.

[1] Japan Ministry of Economy, Trade and Industry. Basic Hydrogen Strategy. 2019.
[2] Bloomberg. Japan’s Hydrogen Bet Faces Headwinds as EV Giants Advance. 2023.
[3] CleanTechnica. Hydrogen for Transportation Didn’t Fail Just Once in 2025. It Failed Everywhere. December 22, 2025.
[4] China Automotive Power Battery Industry Innovation Alliance. 2024 Power Battery Installation Statistics. 2025.
[5] Reuters. Shell Exits Hydrogen Refueling Station Business. 2025.
[6] IEA. Global EV Outlook 2024. 2024.
[7] Panasonic Corporation. Business Report. Fiscal Year 2024.
[8] SNE Research. Global Battery Market Analysis. 2024.
[9] Toyota Motor Corporation. Hydrogen Fuel Cell Business Progress Report. 2024.