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Wednesday, November 3, 2010

Japan's Auto Parts Makers Try to Anticipate Shift to Electric Cars

The electric car could render thousands of companies superfluous in the heart of Japan’s auto parts region.

Or so, in essence, warns a recent widely circulated study that predicts the eventual demise of much of Hamamatsu’s gasoline engine economy. Spurred by that study and a general sense of foreboding, carmakers, parts factories and local governments in this sprawling industrial town are joining forces to prepare for a future of electric vehicles.

Suzuki Motors has helped found a region wide alliance in October which has the task of aiding the part makers develop new technologies designed for the electrical cars. Suzuki will also make an electric engine which will be inspected by the parts makers. Osamu Suzuki, the president of the company said that these are times of changes, times of an industrial revolution. He said that the part makers need to realize this and make use of this change.

There are many experts who have said that the change which will be made by Suzuki might have a huge impact on the other companies in the domain such as Toyota and Honda, not to mention the thousands of small companies which create exhaust pipes, engines, and so on. The Shizuoka Economic Research Institute published a study in August which revealed the fact that about 30 percent or 34.6 trillion yen ($430 billion) of sales from the auto parts industry in Japan each year come from parts which could be replaced by the new technology. That is great news, as it means that the companies which create these parts will not lose their business, but they will simply have to make a change. In other regions, such as Hamamatsu, where Suzuki is based, the percent goes up to 48.

Hisashi Nakajima, senior managing director at the institute and the author of the report, who was also the leader of the study, stated that Japan has always been proud of the vehicles it created, considering them to be some of the best in the world. He believes that if the change is not made, then Japan could lose its force in the domain. More than 2,000 different parts makers are located in Hamamatsu. More than 100,000 people work at those factories, and they bring revenue of 3 trillion yen ($37 billion) each year. The city is also known for its textiles and musical instrument industries, but those two have declines in the last years, as people have resorted to the cheaper imported goods.

This means that the entire city now relies on the engines and on the car components. The city is also home to Yamaha Motor, which is a Japanese pioneer in internal combustion engines that has provided Toyota with engines for some of its vehicles. Yamaha still supplies Toyota with engines for some of its cars. The main reason why it managed to remain the provider is because it constantly updates its technology. This happens to most of the factories from the region which supply engines to most of the car manufacturers from the country, the only exception being Mazda. For more than 40 years Harada Seiki has created technology for automobile engine parts such as piston rings, spark plugs, and crankshafts. Now he wants to use the experience he has acquired in all these years and find a way of using it for the new technology.

The new cars might not need some of the parts which are used in the current cars, but they might require new ones, and the companies which created the old ones could create these one as well. However, there is still a huge problem, and that is the fact that it is unknown when the change will happen, and how fast it will happen. The experts have stated that by 2015, there will be more than 3 million hybrid cars in Japan, and that it will require some more years until the electrical cars will become predominant. There are many different things which might interfere in this, such as the government regulations, the price of gas, the price of the cars, and so on.

Another problem is the fact that it is unknown what type of cars will be predominant. There are various possibilities such as gas-electric hybrids, plug-in hybrids, pure electric vehicles or even fuel-cell cars. There is also the possibility that this is just a phase, and that in the end the gasoline cars will still remain the preferred choice. Nissan will be the first company to mass-produce an all-electric vehicle next month, but it is unclear how successful it will be. The experts from Japan have stated that they might face the competition from the other countries, such as Germany, known for producing two of the most popular brands of cars in the world: BMW and Mercedes, France, Italy, the United States of America, and so on.

China has been interested in the domain as well, as they have started to produce simple and very cheap plug-in cars. In Silicon Valley, Tesla has sold luxury battery-powered sports cars for almost three years now. The car manufacturers have made a change as well, as they have recently surrendered the batteries to the electronics industry. This happens with the biggest brands as well, such as Toyota which started to collaborate with Panasonic, and General Motors which collaborates with a unit of LG Corporation of South Korea. Mr. Nakajima of the Shizuoka Economic Research Institute stated that the auto industry is changing, and as a result everything could change. He stated “In that turmoil, winners can become losers, and losers, winners.” Many people believe that he is right, as this might be a time of complete change.

It seems that the small companies are affected by the change, as many of them are struggling to survive. Oliver Hazimeh, director at PRTM Management Consultants, based in Waltham, Mass. does not fully understand what the companies from Japan are doing. He does not know what those companies are investing in, and on what basis. He believes that the risks of investing into a technology which might not even become popular, or which might become popular only in 10 or 15 years might be too risky. However, it seems that the companies from Japan have the quality of changing their focus very quick. ASTI is one of those companies, as it has produced piano connector parts and wire harnesses for the Yamaha pianos and organs. When Yamaha made the change towards the engines and motorbikes, so did ASTI.

It seems that ASTI is willing to make the change once again, but it needs to make sure that their job will be OK. However, they not see this as a crisis, but they see it as an opportunity.

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