Automobile industry is expected to play a key role in the global climate governance. This is because, first, the road transport sector accounts for about 16% of the total global CO2 emissions, with expected growth from 4 gigatonnes in 2000 to more than 9 gigatonnes in 2050. Second, the industry operates globally with its economic significance that could potentially give a rise to their political power over the international climate negotiations. Japan in particular, is the biggest automobile manufacturing nation as well as one of the key players in the international climate negotiations, and therefore has the potential to affect changes towards more sustainable road transportation sector on a global level. Against these backgrounds, this paper asks how the automobile industry can be the driver to push towards low-carbon society, especially through their developments of the sustainable technologies. To do so, this paper examines how Japanese public policies and business strategies have been influenced the developments of sustainable technologies in the automobile industry. As a result, it emphasises two factors that can be identified as the driving forces of Japanese sustainable technological innovation in the sector. First, technological innovation has been backed up by domestic fuel economy regulations, which can be characterised as ‘co-regulation’ between the government and the industry. Second, two international factors, environmental standards of importing countries, as well as differing trends in technological innovations in other major automobile producing countries – namely Europe and United States – have encouraged technological innovation in the Japanese industry. Based on these findings, this paper argues that there is need for more international governance that would further encourages the business competition for sustainable technologies amongst the major automobile manufacturing nations, in order to push for the low-carbon society at the global level.