Japan’s ELV policy turns to resource security

Japan’s ELV policy is shifting from safe treatment towards resource security, with policymakers prioritising higher-quality recycling to reduce exposure to critical material supply risks. Focus areas include precise dismantling, recovery of metals and plastics, lithium-ion battery management, used vehicle exports and reusable parts, positioning recyclers as strategic contributors to domestic material supply.

Kazunori Kitagawa, Chief of the Eco Management Center at the Japan Productivity Center, discusses Japan’s ELV policy and resource security. — Kazunori Kitagawa

Kazunori Kitagawa, Chief of the Eco Management Center at the Japan Productivity Center at jpc-consulting, says Japan’s end-of-life vehicle policy is increasingly being shaped by resource security concerns, particularly regarding China and the wider geopolitical risks facing critical material supply chains. While Japan does not yet have legislation equivalent to Europe’s Critical Raw Materials Act, policy discussions are now focusing on improving the quality of automobile recycling through more precise dismantling, stronger recovery of valuable metals and plastics, and better management of lithium-ion batteries, used vehicle exports, and reusable parts. For recyclers, the shift points to a more strategic role: not only treating ELVs safely but also helping to secure domestic material flows for future vehicle production.

Resource security moves Japan towards higher-quality ELV recycling

In Europe, the Critical Raw Materials Act (CRMA) is in effect, and it is expected to comprehensively address geopolitical risks related to resources. Therefore, the ELV regulation will likely be influenced by the law in its implementation. However, Japan does not yet have legislation equivalent to Europe’s CRMA.

In this context, policy discussions on resource security, similar to those under Europe’s CRMA, are currently underway in Japan. Regarding automobiles, the issue of the large-scale export of used cars of a quality that could qualify as ELVs, and the fact that most of the rare metals and rare earth elements contained in end-of-life vehicles have not been recovered so far, and instead of being sent to refining facilities, are being crushed, becoming ASR (Automotive Shredder Residue), and being used as slag or disposed in landfills, are being viewed with increasing concern.

I will discuss the issues related to the increase in used car exports separately later, so here I would like to introduce the current discussions that aim to address the geopolitical risks to resource security by improving the “quality” of automobile recycling.

Current discussions in Japan on automobile recycling policy aimed at ensuring resource security tend to focus more on qualitative issues than on quantitative ones. The key point of the discussion is the concept of “precise dismantling.”

The main materials targeted for precise dismantling are steel, copper, aluminum, and plastic, with the goal of a closed-loop resource cycle for cars. Until now, Japanese automobile recycling, like that in Europe, has been tolerant of post-shredder recycling. However, a review revealed that this method could not produce recycled materials of sufficient quality to be used again as automotive raw materials. Therefore, emphasis is now being placed on precise dismantling performed at the pre-shredder stage.

To encourage this shift, a system was launched this April under Japan’s Automobile Recycling Law, in which a portion of the automobile recycling fees collected from automobile users will be used to provide incentives to automobile dismantlers that perform precise dismantling, contributing to a reduction in ASR generation. However, some dismantlers have expressed concern that the incentive is too low given the work’s labor-intensive nature. Therefore, it is necessary to carefully monitor the progress of this new system to assess its effectiveness in promoting precise material dismantling.

Chinese EV growth tests producer responsibility in Japan

As you mentioned, so far, Chinese automakers have not made a significant presence in the Japanese market. Whether Chinese automakers will actively participate in Japan’s vehicle recycling infrastructure will depend on the scale of their car sales in Japan. Currently, there are no signs of this happening.

Fortunately, in Japan, the Automobile Recycling Law is enforced quite strictly based on extended producer responsibility. Therefore, even for cars sold by Chinese manufacturers, consumers pay a recycling fee at the time of purchase, allowing users to receive vehicle recycling services through the official recycling system without a significant financial burden at the end of life stage.

Under the current system, it cannot be expected that materials from Chinese-made ELVs that enter Japan’s automobile recycling system will be returned to China. Therefore, if Chinese manufacturers’ sales volumes increase significantly, it wouldn’t be surprising if they began developing their own recycling infrastructure in Japan.

Japan’s hybrid fleet gives recyclers an early battery test

It’s true that the market share of BEVs in Japan remains very low. However, the number of vehicles equipped with LIBs (Lithium-Ion Batteries) is not extremely low compared to the rest of the world. In other words, a large number of HEVs (Hybrid Electric Vehicles) are sold, and many of them are equipped with LIBs.

In Japan, vehicle dismantlers are required to remove LIBs from ELVs equipped with them. Dismantlers must fulfill this obligation regardless of whether the vehicle is a BEV, HEV, or PHEV. Last year, it is estimated that approximately 17,000 vehicles collected were equipped with LIBs.

Next, I will explain what happens to the removed LIBs. If the removed LIBs are in a condition to be sold, they are sold with the dismantler as the owner.

On the other hand, if the LIBs are damaged or deteriorated and cannot be sold, a safety net is in place to collect them free of charge and recycle or properly dispose of them. This system is called the “Joint Collection Scheme,” and the operator is the “Japan Automobile Recycling Cooperation Organization.” Approximately 13,000 LIB packs were acquired through this scheme, representing about 80% of the total.

Meanwhile, the number of used electric vehicles (including hybrid electric vehicles) equipped with LIBs exported exceeds 50,000, and the number of end-of-life vehicles equipped with LIBs is expected to increase further. This will necessitate stricter measures by Japanese dismantlers for the storage and treatment of LIBs, including those damaged in accidents.

Lithium-ion battery recycling system (Source: Japan Automobile Recycling Cooperation Organization www.jarp.org/productslist/lib)

Pre-export checks return to the resource security agenda

In Japan, pre-export inspections of used cars were conducted from the 1960s to the 1990s. The purpose was not to reduce used-car exports, but rather to prevent the export of substandard used cars from damaging the brand value of Japanese automobiles. Now, in response to the renewed trend of rising used-car exports, this measure has been discussed as one of the optimal options at an official conference chaired by the Japanese government, from the perspective of resource security.

Many stakeholders, including automobile recyclers, are hopeful about its implementation, but it requires revisions to the current system and will necessitate joint efforts from relevant ministries. The level of discussion surrounding this issue will likely be key to reviving pre-export vehicle inspections.

Bar chart showing the rise in used car exports from Japan between 2021 and 2025. — (Unit: Thousand)

Used parts growth depends on trust, access and culture

There are several reasons why the use of used parts in car repairs is low in Japan. First, there’s a cultural belief that things used by others are somehow “unclean.” This may be related to Japan’s unique religious views. The Japanese concept of “unclean” carries a stronger spiritual connotation than a material one. For example, it could mean that the previous owner had a lot of affection for the product, and that feeling still lingers. A car dismantling business owner mentioned to me that many customers apply a similar mindset to the use of used car parts.

More realistically, OEM-affiliated dealerships don’t actively recommend using used parts. This is because it reduces sales and doesn’t reduce the number of genuine parts on their shelves.

Furthermore, despite OEMs promoting parts standardization across different vehicle models, they don’t always disclose information about parts commonality to car recyclers. Especially for Japanese K cars, parts standardization across models is progressing, but automobile dismantlers lack access to this information. This results in dismantling businesses losing sales opportunities for their stockpiled parts.

Also, to my knowledge, there are no car insurance products in Japan that, unlike in Europe, include contractual conditions prioritizing the use of used parts in repairs.

In line with the fundamental principles of the circular economy, expanding the use of used products may require reforms to aspects of Japanese culture unique to the country.

In addition, the fragmentation of distribution routes for used and new car parts is a major problem. It is desirable to integrate both distribution routes so that car users can easily compare the two across the board and make rational, economical choices about repairing their own vehicles.