Market Shift to Electric Vehicles Poses Challenge to Japan’s Automotive Industry

published: 2018-01-19 13:22 | editor: | category: News

Japan’s automotive industry is widely admired for its scale, efficiency, and quality. Nevertheless, the country’s car makers and parts suppliers are starting to worry that the technological transition from traditional fuel vehicles to battery-powered electric vehicles (EV) could make their businesses obsolete within the next few decades. The views of the Japanese car and parts companies, as reported by the New York Times on 9 January, shows that the arrival of EVs has upended the strategies of established providers of automotive technologies. The Times’s interview with CEO of JATCO Ltd., which a transmission factory near Mount Fuji, especially reveals that even companies having expertise in complex parts for popular models are feeling very vulnerable.

A conventional transmission system, which contains numerous belts and gears, is not required for battery-powered electric cars. The latest EV designs also abandon thousands of other parts that are commonly present in the traditional fuel vehicles. As EVs become more available, Japanese automotive suppliers are under increasing pressure to adjust their strategies and develop new solutions. Their success or failure in this area will have wider consequences to Japan’s economy, which has been relying on the automotive industry as the main pillar of support.

Terry Nakatsuka, CEO of JATCO, told the Times that the global shift to EV would “kill” his business. As the world’s leading supplier of transmission systems, JATCO employs around 7,000 workers and is a part of a vast automotive industry ecosystem in Japan. According to the Times, Japan’s automotive sector represents 10% of the country’s workforce, accounts for 20% of the country’s exports, and produces more profit than any other domestic industries.

Japanese car makers such as Toyota Motor Corp. and Honda Motor Co. Ltd. have adjusted their strategies to prevent being overtaken by foreign rivals in the global EV market. While Toyota has doubted the market acceptance of all-electric cars for some time, the company offers gasoline-electric hybrids and is planning to develop new lines of EVs. Increasing competition from Tesla Inc. and other foreign car makers has compelled Toyota to become more attentive to the EV market.

EV market growth has not discouraged Japan from investing in fuel cell technology

The Japanese government has been actively supporting the development of vehicles run on alternative energies, especially fuel cell vehicles (FCV) that consume hydrogen. EVs are included in policies, but critics say there is no “focus” and worry that Japan might miss out on another technological revolution comparable to the introduction of mobile internet technologies.

Lack of initiatives during the early mobile era caused a setback to the domestic electronics industry and hurt Japan’s standing in the world economy. As smartphones and tablets became widespread, the R&D center of the global digital product market moved to the Silicon Valley in the US, while a greater part of the supply chain and manufacturing went to China. Companies like Toshiba Corp., Sharp Corp., and Sanyo Electrics Co. Ltd. have exited markets they once dominated and are now even unknown among the younger generations of consumers. Thus, the Japanese are worried that their automotive industry could suffer a similar decline by not being more active in the EV market.

James Kondo, a visiting professor at Hitotsubashi University in Tokyo, told the Times that adopting EVs and related technologies will be a major challenge for the Japanese automotive industry and the country’s economy as a whole. Kondo explained that the automotive sector drives developments in many other industries. Therefore, fundamental changes – both structural and psychological – in that sector will have rippling effects that reach to the consumer level. Kondo’s analysis is based on his experience working in US and Japanese technological companies.

While EVs are still a tiny part of the global car market, they have good growth prospect. China as the world’s largest car market is committed to advancing EVs, while France and Britain in their campaigns against climate change have also announced timetables for phasing out traditional fuel vehicles.

At the 2017 Tokyo Motor Show, Toyota and Honda unveiled their latest all-electric prototypes to show that they are just as committed to EVs as their competitors. Nevertheless, Japan is an outlier for being a staunch advocate of FCVs as the next-generation of transportation technology. While FCV demand is waning in other countries due to the high cost of the hydrogen delivery infrastructure, the Japanese government is still investing heavily to create a “hydrogen society”. To promote FCVs, 320 hydrogen stations will be built across the country by 2025.

Hiroshige Seko, who heads Japan’s Ministry of Economy, Trade and Industry (METI), stated in September 2017 that the country should not hastily get into the EV race. However, Seko at that time also acknowledged that there is an obvious shift toward EVs as indicated by their growing sales.

Besides EVs, the Japanese automotive industry is adjusting to the trend of increasing automation as well. Many domestic suppliers are upgrading their production lines, aiming to have 100% of the processing work done by robots in the future. In a sense, suppliers are hoping that robots rather than human workers will become redundant when the traditional fuel vehicles disappear.

Not all Japanese car makers have been hesitant in entering the EV market. Nissan Motor Co. Ltd. is one of the earliest Japanese entrants, launching its all-electric Leaf model in 2010. Following Nissan, other Japanese car makers have accelerated their EV development. Currently, Toyota is working with Panasonic Corp. to develop batteries for the 10 upcoming electric models that it will release by the early 2020s. Toyota has also set an EV sales target of one million units every year by 2030.

Some in the industry are optimistic that Toyota will achieve its EV targets because the company has the scale to take EVs to the mass market. Tesla, by contrast, still has significant issues with expanding vehicle production.

(This article is an English translation of news content provided by EnergyTrend’s media partner TechNews. Photo at the top courtesy of Pixabay.)

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