The Tokyo Motor Show kicks off Saturday amid a variety of challenges facing the automobile industry, including intensifying global competition, the yen’s historic surge and supply disruptions caused by natural disasters.
For Japanese automakers, emerging rivals in South Korea and other Asian countries have joined the ranks of long-standing competitors such as General Motors of the U.S. and Volkswagen AG of Germany.
The yen’s record rise has also cut into repatriated profits and eroded Japanese makers’ competitiveness overseas.
“What makes things most difficult is the fierce competition with makers not only in the United States and Europe but also South Korea,” said Tadashi Usui, senior analyst in charge of the automobile industry at Moody’s Japan K.K.
Experts agree that Hyundai Motor Co.’s growth stands out among Asian rivals. Over the course of the previous 10 years, Hyundai more than doubled its production to 5.33 million units in 2009, moving up in the global rankings from 10th to fifth. In 2010, output reached 5.74 million units, said Hiromi Shioji, an economics professor at Kyoto University.
Japan’s No. 1, Toyota Motor Corp., produced more than 8 million units in 2010, but yielded to GM, which marked a rapid recovery from a collapse in 2009, as the biggest global automaker for the first time in four years.
Meanwhile, Hyundai vaulted ahead by introducing a number of low-price models in emerging markets and offering cars of improved quality and design that undercut Japanese carmakers, Shioji said.
To limit production costs, for example, the South Korean maker relies on LG’s technology development of lithium-ion batteries, he said.
In an effort to bolster green technology development, Toyota is reportedly in talks with Germany’s BMW to receive diesel engines in exchange for its hybrid vehicle technology.
Complicating matters, major battlefields are extending beyond Japan, the U.S. and Europe to encompass China, the No. 1 market since the Lehman shock shook the U.S.
India, Brazil and Russia are also increasing in importance.
In fact, Japanese automakers have been struggling to refocus attention on the Tokyo Motor Show amid the rise of similar shows in China and India.
The Chinese market exemplifies the trend, said Masato Sase, a partner and leader of the automotive section at Deloitte Tohmatsu Consulting Co. Early entrants like GM and Volkswagen made inroads while Japanese makers stood on the sidelines, afraid of seeing their technological expertise appropriated, he said.
To win the global competition, Sase said, Japanese makers need to focus on two big trends: growth in emerging markets and electric vehicles.
“Improving green technologies is mandatory to survive the competition,” he said.
Competition over electric vehicles will intensify because breakthroughs in the development of electric motors are easier to achieve than with internal combustion engines, analysts say.
With their advantages in price competitiveness and improving technologies in motors and certain types of electronic parts, Chinese and Taiwanese makers in particular are driving the growing EV market.
BYD Co. is a good example. Once just a battery maker, the company is now the top Chinese EV maker.
But Japanese companies still have an advantage over the Chinese and Taiwanese when it comes to mass production, Sase of Deloitte said.
“As for batteries, the advantage is the quality in terms of capacity and yield (the ratio of good units to total production),” Sase said. “The advantage means a lot when makers produce hundreds of thousands of units.”
The trend toward electric vehicles and plug-in hybrids is well under way. By 2020, Japan aims to produce 2.07 million EVs. China is targeting 5 million EVs and plug-in hybrids, Britain and France 2 million EVs and Germany 1 million. The U.S. aims to produce 1 million plug-in hybrids by 2015, according to Deloitte.
Meanwhile, the March 11 earthquake and tsunami in the Tohoku region and the recent flooding in Thailand disrupted the supply of auto parts — and taught Japanese makers a hard lesson in risk management.
In particular, the floods in Bangkok and surrounding areas hurt Japanese makers who had sped up production there after the March 11 disasters back home.
“As many as 300 suppliers were flooded in Thailand,” said Nissan Motor Co. Chief Operating Officer Toshiyuki Shiga, who is also chairman of the Japan Automobile Manufacturers Association, at a news conference this month.
Many carmakers have already resumed production, but Honda Motor Co., whose plant in Rojana, Ayutthaya Province, north of Bangkok, was flooded, has no plan yet to resume operations.
Analysts said the natural disasters underlined the importance of carmakers’ efforts to reduce the number of bottleneck parts and prepare for alternatives that can be produced in other areas or nations.
Prius plug-in orders
Toyota will begin taking orders Tuesday for the plug-in version of its hit Prius hybrid, announcing efficient mileage and a relatively affordable starting price of ¥3.2 million, which is even lower with green vehicle subsidies.
Toyota is targeting Prius plug-in sales of 35,000 to 40,000 a year in Japan and 60,000 globally. The car is set for delivery in Japan in January. With subsidies the cost comes down to ¥2.75 million. It starts at $32,000 in the U.S. and €37,000 in Europe, according to Toyota.
Japan’s top automaker says the plug-in, which it calls the Prius PHV, is for motorists who want something more innovative than a regular gasoline-electric hybrid but are worried about running out of power on the road, as can happen with pure electric vehicles.
When a plug-in runs out of power to keep the electric vehicle going, it becomes a hybrid.
“The plug-in is the premier next-generation ecological car that will follow the hybrid,” said Executive Vice President Takeshi Uchiyamada, the Toyota Motor Corp. engineer known as the “father of the Prius.”
The Prius plug-in has an estimated electric vehicle cruise range per charge of 26.4 km, according to Toyota.
Its mileage is estimated at 61 km per liter for Japanese test conditions, which converts to a whopping 143 mpg.
Such numbers are going to vary depending on road conditions so mileage numbers for the U.S. and Europe are still unclear.
Green cars such as the Prius plug-in are expected to take center stage at the Tokyo Motor Show, which opens to the public this weekend.