AI, IoT, EV, and M2M change game for auto-parts makers

The automotive industry is experiencing tremendous changes. Innovative technologies, such as IoT and Big Data, are setting the groundwork for the smart-car of the future, as environmental awareness is forcing carmakers to adopt an eco-friendlier line.

Can you please share your personal perspective on the status of the auto parts industry today and your expectations about future trends?

Companies in the Japanese auto-parts industry have, up to now, been growing with their axis on formulation of global production-supply structure in response to car manufacturers’ demands for their respective product line, meaning a growth in tandem with that of the car makers.

From now on, with the development of various innovative technologies around AI, IoT, and Big Data, the automotive industry will see a big change. As the borders among the industries becomes ambiguous, electronics makers and other newcomers from the IT industry will join in this industry. As a result, there will be an alliance for cooperation with such newcomers and the big conventional industrial automotive companies, while there will be rivals, with whom competition had never been imagined in this industry.

The new trends such as electric vehicles and autonomous driving are now on the rise and supported by governmental leadership. The new competition game for innovation has now begun for car makers and also for auto-parts makers.

When it comes to the application of IoT, AI, Big Data, and Cloud technology, is the ‘Kaizen’ culture still innovative, or has it become an obsolete model to face today’s challenges of meeting demand for computerization and self-driving, which requires a more flexible approach?

Kaizen is a unique part of Japanese culture, which was generated through its struggles in the stringent business environment with the appreciated Japanese yen after the oil crisis in 1970. The method tuned to “one yen, one second” cost reduction and efficiency under the spirit of “Monozukuri” is now well expanded to the whole world.

The world-renowned quality and reliance around Japanese vehicles is the result of Kaizen activities in pursuit of Monozukuri in the Japanese auto industry.

Development and commercialization of hybrid, plug-in hybrid, EV, and FCV (fuel cell vehicle) originate from Kaizen activities in response to the then respective environment.

There is no doubt that the auto industry will move more towards EV and autonomous driving under the new industrial change led by rapidly growing AI and IoT technologies.

However, from a practical point of view, it will take considerable time for such new technologies to proliferate globally, because the infrastructure must be well prepared beforehand, especially in emerging economies.

No one can precisely estimate how the overall environment will be prepared for the acceleration of AI and IoT, and subsequently what kind of world and industries will be formulated. Every industry and company will keep studying.

Kaizen is not only for cost reduction and efficiency, but it has the concept of “innovation and improvement”, the latter of which, I believe, is also harbored in the development processes of such new technologies as AI and IoT. Kaizen will remain an important ideology.

For instance, even after the proliferation of EV, there will always room for further evolution in terms such as lighter batteries and further extension of cruising distance.

Repeated Kaizen will be the driving force for continuous development of innovative technologies.

In today’s automobile world, there are just a few vehicles that do not use Japanese mechanical components. From unbreakable piston rings to roaring engines, Japan’s manufacturers have combined strict attention to quality with infallible reliability to become the undisputed leaders of mechanical components.

Could you please give us an overview of JAPIA’s activities and mission?

JAPIA was established in 1969 with the purpose of promoting the auto-parts industry.  Now the number of member companies stands at over 400. JAPIA has been communicating with Ministry of Economy, Trade and Industry for support for member companies wishing to go overseas. Now the number of overseas entities operated by its member companies stands at over 2,000, operating in around 52 countries.

In the future, we will need to have cooperation and affiliation with companies in different industries. Taking the example of Dyson and Yamada Denki coming into the industry: the category of the industry itself will be changed, thus dramatically altering the line-up structure of auto component parts. This will make us think about how the organization and the various activities should be in the future.

Such review of organization and activities will take numerous trial and errors. Amongst the flood of information related to EV technology and autonomous driving, JAPIA will need to collect all information, not only that related to “auto-parts”, but also trans-industrial information such as that on venture business, start-ups, and that on technology, know-how and services provided by them.

What do you identify as priorities for the future success of your members?

It is difficult to express in a simple manner due to the diversity of member companies and characteristics of products, but I can tell you generally that Japanese companies take pride in production and supply overseas of products with the highest-technology and quality, and this position will be the source reason for Japanese parts makers located overseas to be highly evaluated.

I think that from now on the technologies and quality accumulated by Japanese companies should be merged with new technologies such as AI and IoT.

If I take an example of automotive lamps, which is the business field of our company Chairman of which I am appointed, the company has successfully commercialized the world’s first LED headlamp in 2007, but now is incessantly working on further R&D for next-generation light sources.

From the mechanical point of view, we are providing such evolution systems of Adaptive Front Lighting System (AFS), and Adaptive Driving Beam (ADB). (AFS:      The whole low-beam unit is moved horizontally in accordance with the driving axis and speed. ADB: The light distribution of the high beam is automatically adjusted to best meet the vehicle ahead or coming vehicles.)

We are focusing on autonomous driving R&D, taking advantage of lamp positioned right at the four corners of a vehicle, thus lamps and sensors will be built into a single unit.

The problem, however, is the difficulty to perform the required R&D all by ourselves, a situation which is true for most Japanese companies. In this respect, we believe it will be important to consider the possibility of investment, joint developments or M&A with venture businesses and start-ups with applicable technology, know-how, and services.

What would you say are the competitive advantages of Japanese Monozukuri vis-à-vis the country’s rising regional competitors such as South Korea or European powerhouses such as Germany?

Korean companies once had popularity due to their European style as well as their positive overseas development. Korea, however, has problems such as the nurturing of small and middle-sized companies. We believe the Korean economy will be facing a declining trend for now.

As for Germany, I feel it is capable and competitive in the Chinese market. But their inroad into China has been led by governmental policy.

Contrary to these examples, Japanese companies are going into China with their respective efforts, and are performing as competitive as or more competitive than German counterparts. In this sense, I can say that Japanese companies will be winning in overall standpoint.

With regards to German car makers shift to EV: I think it will be due to the diesel issue.   German car makers, because they lag behind Japan in terms of HV and PHV, will have no option but to go directly into EV. However, as I have mentioned above, a considerable time will be required before the infrastructure for EV is developed across the world.

Japanese car makers, on the other hand, have a variety of line-ups; EV, HV, PHV, and FCV (fuel cell vehicle). During the period before the complete shift to EV is realized, Japanese car makers will be able to provide vehicles to meet the demands in the market in a timely and flexible manner, which will be their absolute advantage over the others.

Japan is the 3rd largest market worldwide. Nonetheless, the country can no longer afford to over rely on its huge-yet-aging domestic market. Prime Minister Abe is pushing forward policies in an effort to open up the country’s economy to the global market.

How important will be for your members to expand overseas through M&As and strategic alliances?

The Japanese stock index is shifting at a high level since Mr. Abe initiated “Abenomics” formation in December 2012. This trend may have been caused by the increasing investment ratio by overseas investors and their long-time holding, which, I believe, will simply be an evidence of the high evaluation for sustainable growth and corporate governance of Japanese companies.

It is true that Japanese companies have lots of money for investment. From now on, there will be a need for further investment in AI and IoT fields, or investment in potential markets in South America, Africa, and the Middle East.

The investment methods will vary depending on each company, considering their respective product and management environment. What I can say is that most Japanese companies have been strengthening their corporate constitution up to now - in time for the opportunity to invest in innovative technology development due to industrial structural change, or investment in high-potential markets.

M&A is one of the means to do this. It takes tremendous efforts and endeavors to form an alliance with a company from a completely different history, culture and tradition. In this sense, it will be effective for us to find and nourish a comparatively young venture company while it is being at its first stage as a company, and provide support to it in line with our management policy for successful commercialization.

Regardless of what measure will be taken, we are in a global community where people of various race and way of thinking are working and are moving for diversity. In this respect, it will be about time, as a whole, for the Japanese companies to make such efforts as taking a second language as an official company language in addition to Japanese.

Based on your expertise and members, what are the markets with the highest growth potential for your members?

China, with its huge population, accounts for one third of the world’s auto sales, but only one out of ten people has a car, which is very compared to one of two for Japan, and one out of one for the United States. The same is true with India where one vehicle is held for 30 persons. China and India are still great potential markets for further growth.

Furthermore, there will be more potential markets in South America, Africa, Russia, etc.

Meanwhile, Japan, Europe, and the United States are, as you know, already mature markets and there is no expectation for dramatic growth in the future.  But the importance is for each car maker to work on new technologies and put higher-value so that the markets will keep growing.

What is the role of the U.S. market for the industry’s expansion?

The United States is a mature market, but still is a huge market. Lots of Japanese car makers and parts-suppliers have their presence. It is an important market from the viewpoint of business management.

In the United States, there are an increasing number of actions, in tandem with IT industry, for investment aimed for commercialization of autonomous vehicles and eco-friendly vehicles. Especially in the field of autonomous driving, it is expected for a first market to be formulated, thus further activating restructuring between the auto industry and IT industry.

In Silicon Valley, there is a huge investment in the field of the auto industry, and tremendous related technologies are emerging in this region. This means that, for evolution of automobiles, auto makers are not able to deal with the change and go forward, just with the conventional know-how or equipment. They need cooperation with venture companies and start-ups involved in the technological innovation.

We position the United States as the market that generates the driving force for the global automotive industry as a front runner of technological innovation.

Many Japanese companies are advancing in Silicon Valley. Our company also established a laboratory in the region in October 2016, and is working with various venture businesses and start-ups with a view to further study next generation automotive lighting equipment, etc.