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Japan’s auto industry players may shrink to 3 from 8



Japan’s automobile industry may witness a dramtic shrink before year 2020 as the number of carmakers may be reduced to three or fewer.

Japan is home to eight carmakers, imcluding world’s sales leader, Toyota Motor Corp., and other global players such as Honda Motor Co. and Nissan Motor Co., way head of Germany, which has three domestic automakers, or the far bigger U.S. market, where Ford Motor Co., General Motors Co. and Tesla Motors Inc. are the only independent companies left.

Toyota’s deal in January to acquire the remainder of Daihatsu Motor Co. for about $3.2 billion in stock may represent the dawn of a leaner Japanese auto industry, according to Takaki Nakanishi. By 2020, the Jefferies Group LLC analyst sees the nation’s ranks of carmakers shrinking to no more than three company groups, driven by the rising costs of competing to make cars cleaner, safer and more connected.

“To have one or two carmakers in a country is not only natural, but also helpful to their competitiveness,” Nakanishi said in an interview. “Japan has just too many and the resources have been too spread out. It’s a natural trend to consolidate and reduce some of the wasted resources.”

Poised to be the largest acquisition in Toyota’s history, the purchase of Daihatsu will reduce Japan’s roster of car companies down to seven. The nation has largely avoided the acquisition activity in Europe led by Volkswagen AG — which has absorbed Porsche, Audi, Lamborghini and others — and championed by Sergio Marchionne, who combined Fiat Chrysler Automobiles NV in 2014 and has continued courting peers for another deal.

For Japan’s second-tier car companies, the cost of keeping up with investments in cleaner powertrains and automated driving systems is getting prohibitive.

Daihatsu President, Masanori Mitsui, for one, said the 109-year-old company opted to become wholly owned by Toyota as it struggled to keep up with the rise of electric cars, as well as autonomous and connected-car technologies.

“If we want to overcome the upheaval in our business environment and the fierce competition to develop new technologies and emerge stronger than ever before, we must dramatically strengthen our collaboration with Toyota,” Mitsui said at a press conference on Jan. 29 with Toyota President Akio Toyoda. Daihatsu’s resources are “not enough for us to be called a truly global company,” he said.

Only Honda, Mazda Motor Corp. and Mitsubishi Motors Corp. have stuck with go-it-alone strategies, avoiding cross-share ownership tie-ups with other car companies. This is despite none of Japan’s auto companies coming close to the financial firepower at Toyota, which has 5.2 trillion yen in cash and short-term investments. That’s more than the six other automakers combined for the last fiscal year.

The cash edge is also reflected in research-and-development spending. Toyota forecasts its R&D expenditures will reach 1.06 trillion yen for the year ending in March. That’s more than the combined R&D spending projected by Nissan, Subaru maker Fuji Heavy Industries Ltd., Suzuki Motor Corp., Mazda and Mitsubishi Motors.

Fresh alliances may be in the works. Mazda and Toyota last year said the two would broaden technology-sharing for greener cars. Mazda, which no longer counts Ford among its shareholders, hasn’t yet considered a capital alliance with Toyota. However, “we don’t know what will happen in the future,” Tetsuya Fujimoto, Mazda’s executive officer for financial services, told reporters Feb. 4.

Both Suzuki and Toyota have rejected reports by the Nikkei newspaper and other Japanese media suggesting the two also are in talks over an alliance. Regardless of the denials, Jefferies’ analyst Nakanishi expects the two companies may collaborate with one another before the end of the decade.

Toyota’s relationship with Daihatsu is “at the stage similar to calling back a wife who’s gone out for night parties and telling her it’s time to look after the kids,” Nakanishi said. “For Suzuki, it’s like they’re just starting to exchange diaries and have yet to hold hands. When Toyota’s starts to hold 5 percent of Suzuki’s shares, this will be like finally touching fingertips.”

Honda also has signaled it’s willing to diverge from its usual strategy, expressing interest in deepening its collaboration with GM. Their cooperation on hydrogen fuel cell technology has gone well and should end up being used in a future vehicle, President Takahiro Hachigo said last month.

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