Another Chinese automaker is making its move into Japan. Guangzhou Automobile Company (GAC), one of China's state-owned vehicle manufacturers, is preparing to sell electric vehicles in the Japanese market starting next year, according to a report from Nikkei Asia.

Taking Aim at Japan's EV Market

GAC's strategy involves offering two electric SUV models through Japan-based distributor M Mobility. The company will bring its Aion UT and Aion V SUVs to Japanese customers, with the Aion UT carrying a price tag of approximately 3.3 million yen (about $21,000). The automaker has set an ambitious goal of securing 2,000 orders in Japan by 2027.

This move follows BYD Co. Ltd. (BYDDF)'s recent entry into Japan's specialized Kei car market with its Racco EV. The Kei car segment is a uniquely Japanese category featuring vehicles that are smaller than standard cars and historically came with attractive tax benefits, though those incentives have diminished somewhat in recent years.

BYD isn't stopping at Japan. The company is eyeing the European market for the Racco as well, waiting for EU regulators to finalize rules that would allow European-manufactured compact vehicles, classified as E-Cars, to be sold across the region.

Compact Cars Gain Political Attention

The compact car conversation has even reached Washington. President Donald Trump recently announced he had approved production of what he called "really cute" compact vehicles he observed in South Korea and Japan, made by manufacturers like Toyota Motor Corp (TM) and Honda Motor Co. Ltd. (HMC).

This interest in affordability aligns with the administration's recent rollback of Corporate Average Fuel Economy (CAFE) standards, a regulatory change that Ford Motor Co. (F) CEO Jim Farley publicly welcomed. The administration has been emphasizing vehicle affordability as a key industry priority.