Japan's vehicle electrification drive, aimed at reducing greenhouse gas emissions, is shaking the foundations of the wider automotive industry, which has a pyramid structure comprising several automakers and lower layers of numerous auto parts suppliers and subcontractors.
Progress in the shift away from gasoline-only vehicles will render about half of auto parts redundant, forcing manufacturers to consider the tough choice of realigning with other companies for survival or closing down.
Japan's vaunted automotive craftsmanship, which has long sustained industry, faces an unprecedented challenge.
Prime Minister Yoshihide Suga's policy of banning sales of new gasoline-only vehicles, beginning in 2035, drew groans of disappointment from an executive of an auto parts manufacturer in Tomioka, Gunma Prefecture. "Japan's auto industry is destined to lose the advantage it has developed over the years," the official said.
Electrified vehicles are very different from gasoline models in terms of the number and kinds of parts used. About 30,000 parts are used for a gasoline vehicle, while an electric vehicle, powered by an electric motor, uses fewer than half of that number, not including the engine or the muffler, which requires sophisticated manufacturing technologies.
Companies from outside the automotive industry, such as electrical appliance manufacturers, find it easier to enter the market for electric vehicles, which feature a simpler structure than gasoline models.
The president of an auto parts maker in Ota, Gunma Prefecture, known as a factory town of Subaru Corp., emphasizes the need for conversion in its business line. "We should develop links with companies that can steadily produce motors," he said.
It does not seem easy for auto parts makers to find new demand elsewhere, however.
In the aircraft industry, which has attracted attention as a potential source of alternative demand, Mitsubishi Heavy Industries Ltd.'s project for Japan's first domestically developed small passenger jet has suffered setbacks. Also, it is uncertain whether the aerospace industry will generate as much future demand for parts manufacturers as automobiles do.
"Automakers have given us stable jobs for five to 10 years once a new vehicle model is released. This formula of business will no longer be good," the president of the auto parts maker said.
The automotive industry's pyramid structure has automakers such as Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. at the top, followed by affiliated auto parts suppliers, subcontractors and lower-tier subcontractors.
Including related businesses, the broader industry employs about 5.5 million workers altogether. Of them, workers at auto parts manufacturers account for 700,000, or some 10% of the total workforce of Japan's manufacturing sector.
The effects of vehicle electrification are expected to be pronounced particularly among auto parts subcontractors and those placed lower in the pyramid structure that have no direct business relationships with automakers.
"Further industry realignment and consolidation seem inevitable," Fumio Hashimoto, an executive of the Ota Chamber of Commerce and Industry, said.
Akihiro Yamanishi, who is involved in business rehabilitation support at the Deloitte and Tohmatsu group, said the key to survival for auto parts manufacturers is "whether they can detect changes in industry trends quickly and take swift action" for conversion in business lines and realignments.
But the president of an auto parts supplier in Kanagawa Prefecture that has a long relationship with Nissan warns against easy realignment or consolidation.
"Manufacturing is never so simple that one plus one equals two. (Such moves) would only degrade Japan's craftsmanship," the president said.
The government is counting on vehicle electrification as a new driver of growth after the novel coronavirus pandemic is brought under control.
But Toyota President Akio Toyoda, speaking at a news conference last December as chairman of the Japan Automobile Manufacturers Association, expressed concerns on behalf of the industry over too hasty moves toward vehicle electrification. "Our current business model, in which we increase jobs and pay taxes, would break down," Toyoda said.
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