TOKYO -- Japan is on track to exhaust about 90% of its fiscal 2026 budget for electric vehicle purchase subsidies through September, bringing the program near its limit with six months remaining in the year ending March.

By automaker, Tesla vehicles accounted for 19.1 billion yen ($121 million) in subsidies in April-September, equivalent to 17% of the fiscal 2026 budget of around 110 billion yen. The U.S. EV maker was second only to Toyota Motor and exceeded the totals for Japanese automakers like Nissan Motor and Honda Motor.

The subsidies are provided under Japan's Clean Energy Vehicle (CEV) program. Buyers can apply to receive up to 1.3 million yen per vehicle, depending on the model.

If all buyers of eligible vehicles sold between April and September applied, payouts would total 97.4 billion yen, 89% of the budget. Nikkei tabulated the figures based on data from U.S. research firm Mobility Global and sales statistics from industry groups including the Japan Automobile Dealers Association.

Following U.S.-Japan tariff negotiations, Tokyo cut subsidies in January for fuel cell vehicles while raising the maximum EV subsidy by 400,000 yen. The change increased payouts substantially for models sold by Toyota, Tesla and other automakers.

Toyota has received the largest share by manufacturer at 34.5 billion yen, or 31% of the total budget. Its sales have been driven by the updated bZ4X, which underwent a partial redesign in October 2025 and qualifies for the maximum subsidy of 1.3 million yen.

By model, the bZ4X received the most support at 18.7 billion yen, followed by Tesla's Model Y at 15.3 billion yen. The Model Y is eligible for a subsidy of 1.27 million yen. Tesla also boosted sales through a free charging campaign.

Ranking next for subsidies were Nissan's Leaf, which received a redesign in January, and Honda's Super-One.

Passenger EV sales in Japan rose 150% year-on-year to a record 70,273 units in April-September, industry data shows. EVs accounted for 3.7% of total new-vehicle sales, up 2.1 percentage points.

But the subsidies also have produced unintended consequences. Tesla's demand outstripped availability, leading to repeated delivery disruptions including last-minute changes to delivery dates and pickup locations.

Many other imported brands saw their subsidy amounts reduced and sales decline. EV sales by foreign automakers excluding Tesla fell 26% in April-September to about 7,900 units.

The effects have spread to the used-car market, where some EVs cost more than their new counterparts because subsidies are unavailable for used electrics. If used EVs cannot find domestic buyers and are exported, Japan could lose access to the rare metals and other valuable materials in their batteries.

Uncertainty over when the subsidy program will run out may add to the confusion. In September, the Ministry of Economy, Trade and Industry said applications could close in early December and would be terminated once the budget ceiling is reached.

"The budget is being used up about one month faster than we expected," a ministry official said.

"We want to provide support as seamlessly as possible because interruptions create swings in supply and demand," the official said about support after the cap is reached. "Nothing has been decided this time, but in the past we have granted subsidies retroactively." For fiscal 2027, which begins in April, the ministry is requesting the same 110 billion yen budget as in fiscal 2026.

"We will consider appropriate levels for the overall budget and per-vehicle subsidies," the official said. "We will continue providing subsidies until Japan catches up with global standards."

One executive at a Japanese automaker criticized the program, saying "the subsidy per vehicle is too high. We're grateful for the support, but it has distorted supply and demand." Suzuki Motor President Toshihiro Suzuki poses with the company's new e-Sky electric kei car.

Suzuki Motor begins selling the new e-Sky EV in November, its first electric passenger minicar.

Priced from 2.12 million yen it will be the cheapest EV sold in Japan.

If it becomes eligible for subsidies as expected, the effective purchase price will start around 1.55 million yen, roughly in line with gasoline-powered kei cars.

It remains unclear how the government would respond if the subsidy budget is exhausted before the end of the fiscal year.

Suzuki said it set the e-Sky's price to compete with gasoline vehicles even without subsidies.

"Subsidies are welcome, but they will end someday," President Toshihiro Suzuki said at the model's launch event Tuesday. "Is it really the right approach to depend on subsidies to sell vehicles?"