Second stage

A group of street racers called Team Emperor, led by the professionally trained driver Kyouichi Sudou and all Lancer Evo drivers, appears in the Gunma Prefecture. They move through Gunma challenging and defeating the best team on each mountain they arrive at. However, Kyouichi's real goal is to have a rematch with Ryousuke Takahashi, whom he does not know has recently been defeated by Takumi. When he discovers this, Team Emperor challenges the Akina Speed Stars to a race in the hopes that Takumi will compete in his 86. Takumi becomes the first person in Gunma to defeat a member of the Emperor team on the downhill when he beats the Evo team's second best driver, Seiji Iwaki.
Kyouichi then challenges Takumi to a match to “teach him some things” and as a sort of cover event for his race with Ryosuke. Although initially uninterested, Takumi eventually decides to go to Akagi. During this race the engine of Takumi's 86 is blown and effectively destroyed. Kyouichi lectures Takumi on the disadvantages of using such an old car in a modern street race. The Emperor leader also didn't consider it a real battle. He tells Takumi to get a more competitive car and race him again. The loss was not due to the 86's lack of power, as Ryosuke explains, it was due to the fact that Takumi had not driven on Akagi before and didn't know the entrance speeds or anything else about the course that he could use to his advantage, basically leaving him driving blind in front of a power mongered Lancer Evolution 3 with the Misfiring System (anti-lag). If Takumi only knew the course even a little the race would have probably ended differently.
Finally, the long-awaited battle commences. Kyouichi was hungry to beat Ryosuke once and for all. The race started with the white FC leading, as Kyoichi formulated a new technique, Simulation X, for this battle alone. Midway through the race, the black Evo 3 passes Ryosuke and went on to lead until Ryosuke discovers his opponent's weakness. After defeating Kyouichi again, he explains to him that he still had that fear of right-hand corners, wherein a car running to the opposite direction can collide head-on. His local mountain pass, Irohazaka, was a one-way road, which is why Kyouichi wasn't able to work on removing that fear.
Bunta, knowing that the engine in the 86 was about to give out, had already bought a new engine - a high-revving, race breed variation of the standard Toyota 4A-GE 20 valve twin cam engine, which is used for Group A Division 2 Touring Class races in the Japanese Touring Car Championship. He installs the engine without a new tachometer to teach Takumi the importance of learning mechanical knowledge and understanding why the car behaves as it does. Takumi encounters a fellow 86 driver by the name of Wataru, who after reacting with great surprise to Takumi's lack of mechanical knowledge explains that the engine is an extremely strong powerplant and requires several new gauges including a high-revolution tachometer, to be useful.
Once Takumi has made these modifications, Wataru challenges him to a race anywhere of Takumi's choosing. Takumi chooses to race on Wataru's home course of Shomaru, an abandoned mountain pass that is very dangerous. The race becomes one of endurance, and will only end if the chaser overtakes the front-runner. Wataru and Takumi switched positions several times, until Takumi discovers a change in the course's environment brought on by their many high speed passes and passes Wataru on a stretch that was previously too narrow for him to do so.