Trans­port revo­lu­tion leaves bump in the road for Ja­panese car gi­ants

Much-ad­mired in­dus­try faces challenges from elec­tric and self-driv­ing ve­hi­cles, writes Alan Tovey

The Daily Telegraph - Business - - Business -

Ja­pan’s au­to­mo­tive in­dus­try has long been ad­mired glob­ally. Build­ing up from a shat­tered post-war econ­omy, it was at the fore­front of the coun­try be­com­ing a man­u­fac­tur­ing su­per­power and is worth 21 tril­lion yen (£150bn) a year.

It is the world’s third largest pro­ducer with an­nual pro­duc­tion of around 9m, half of which is ex­ported.

Mil­lions more ve­hi­cles roll off fac­tory lines at for­eign plants owned by Ja­panese firms ev­ery year.

Mar­ques such as Toy­ota, Nis­san, Honda, Mazda and Mit­subishi are all house­hold names. But the most re­cent quar­terly re­sults across the in­dus­try high­lighted how Ja­pan’s au­to­mo­tive sec­tor is stalling. Toy­ota, which bat­tles with Volk­swa­gen Group for the ti­tle of the world’s big­gest au­to­mo­tive busi­ness, with each pro­duc­ing close to 11m ve­hi­cles an­nu­ally, re­ported its small­est profit in al­most a decade.

Nis­san sounded the alarm, warn­ing it faces a record Y470bn an­nual loss. It is un­der­go­ing a painful re­struc­tur­ing to take out ex­cess global ca­pac­ity, with 11,000 jobs go­ing world­wide.

Its trou­bles are com­pli­cated by af­ter­shocks from the ar­rest of for­mer boss Car­los Ghosn over al­leged fi­nan­cial crimes, and its dif­fi­cult re­la­tion­ship with part­ner Re­nault.

Mit­subishi, a ju­nior part­ner in the Nis­san-Re­nault al­liance, warned of an Y140bn an­nual op­er­at­ing loss, and pulled back from some mar­kets, in­clud­ing the UK.

Man­age­ment at Honda said they needed to “re­shape” the busi­ness as they wor­ried in­vestors with an Y80.8bn loss in the first quar­ter.

Coro­n­avirus was to blame for much of the red ink, with buy­ers sit­ting on their hands. But the losses also re­vealed how some Ja­panese man­u­fac­tur­ers had been ag­gres­sively dis­count­ing. As sales ebbed be­cause of the pan­demic, they were left ex­posed.

About 5.5m peo­ple – al­most a tenth of Ja­pan’s work­force – are em­ployed in the au­to­mo­tive or re­lated in­dus­tries, and signs that such a key sec­tor is no longer tick­ing over smoothly of­fer a ma­jor con­cern to Tokyo. Al­though fiercely denied by the com­pa­nies, re­ports that the Ja­panese gov­ern­ment tried to force a merger be­tween Nis­san and Honda to pro­tect them in the face of fall­ing sales would ap­pear to have some logic to them.

Such a tie-up would fol­low the Ja­panese tra­di­tion of keiretsu – of­ten com­pet­ing com­pa­nies with crossh­old­ings in each other – which en­cour­ages sta­bil­ity in the mar­kets and re­duces the chances of takeovers. But how Honda would func­tion within such a frame­work is ques­tion­able.

Toy­ota is a dif­fer­ent case given it has about £60bn of cash – enough to see it through the cri­sis. A sign of its con­fi­dence was news at the start of the year that Toy­ota planned to build its own “city of the fu­ture” on a 175-acre site at the base of Mount Fuji.

The so-called Wo­ven City is planned as a “liv­ing lab­o­ra­tory” – an in­cu­ba­tor for new forms of trans­port and tech­nol­ogy such as ro­bot­ics, au­ton­omy, hy­dro­gen fuel and smart homes. The name is a nod to the com­pany’s ori­gin in 1867 as a maker of pow­ered weav­ing looms.

The global car in­dus­try is fac­ing a revo­lu­tion. Self-driv­ing cars, mo­bil­ity ser­vices such as ride-shar­ing and the move to elec­tric – and po­ten­tially hy­dro­gen – power mean that the days of per­sonal own­er­ship of ve­hi­cles with in­ter­nal com­bus­tion en­gines are al­most cer­tainly num­bered. The chal­lenge for Ja­pan’s car­mak­ers is what to do with their fac­to­ries mak­ing ve­hi­cles whose time may soon be up.

There’s no bet­ter warn­ing than com­par­ing Toy­ota with Tesla. The for­mer makes 11m cars an­nu­ally and is prof­itable ( just), while Elon Musk’s com­pany has made just over 1m cars since be­ing founded in 2003 and has only the vaguest fa­mil­iar­ity with profit. De­spite this, Toy­ota is valued at about $215bn (£163bn), while Tesla is not far off dou­ble that, at $391bn. The mar­ket is pric­ing in the dis­rup­tion that is com­ing to the sec­tor.

While Toy­ota looks un­likely to be a tar­get for for­eign buy­ers, Ja­pan’s smaller and more trou­bled au­to­mo­tive man­u­fac­tur­ers could be – es­pe­cially for cash-rich com­pa­nies from China.

It’s al­ready hap­pen­ing else­where but on a smaller scale. Chi­nese con­glom­er­ate Geely has snapped up Volvo and Lo­tus, both of which are thriv­ing un­der the new own­er­ship, while Shang­hai Au­to­mo­tive In­dus­try Cor­po­ra­tion ac­quired MG and works with VW and Chevro­let to build cars for its home mar­ket.

Per­haps the big­gest dan­ger for Ja­pan’s much-ad­mired car in­dus­try is if the fo­cus on its in­ter­nal trou­bles means it stops in­no­vat­ing and be­comes vul­ner­a­ble.

A Nis­san em­ployee on the assem­bly line at the Op­pama plant in Yoko­suka near Tokyo

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.