In the realm of aftermarket automobile parts, where competition is fierce and innovation is key, Japanese firm DIXCEL stands out as an example of success.
Over the last 25-30 years in the aftermarket automobile parts industry, Japan has seen the rise of regional manufacturing competitors from countries like South Korea, China, and Taiwan, who have replicated the Japanese model of success but done so at a cheaper labor cost, thus gradually pushing Japan out of mass industrial markets, however, we still see that many Japanese firms are leaders when it comes to niche B2B fields. With that being said, how have Japanese firms been able to maintain their leadership despite the stiff price competition?
As a manufacturer, the only way to significantly reduce costs is to produce your product in mass quantities, thus the term mass production. Take for example watch brands such as Longines, Mido, Omega, and Blancpain; these are all under the umbrella of the Swatch Group. They all need good movements at competitive costs so that such premium brands with smaller sales volumes can have healthy profit ratios. In the case of automobiles, for example, brand names such as Porsche are under the Volkswagen umbrella, and Ferrari is under Fiat.
In the case of automobile parts, if we deal with only high-end products we can do business, however, I don’t think this is sustainable because, at some point in the future, we will hit a wall. This is why we changed our viewpoint and decided to deal with basic-range-level to high-end-level products. Our business in this sense is similar to Toyota’s business model with the basic-range-level like the Yaris to the high-end models like the LEXUS range. I think this business concept is necessary for Japanese manufacturers. In the past Toyota has sold many Corollas and Coronas and as a result of these strong sales the company as a whole was able to grow. I think this is an important lesson for manufacturers. Still, compared to Chinese products, Japanese products are higher in cost, but thanks to the weak JPY the gap is narrowing. With this narrower gap and the upper hand in the experience, Japanese manufacturers can compete in the global market.
Your company specializes in brake parts, and one of the big issues brake manufacturers face is brake dust. Brake dust is not only harmful to the aesthetics of the car, but since most dust scrapes are iron power, the more dust you have, it means the more brake discs are worn. Your firm has developed the M-Type brake pads, an ultra-low dust brake pad for street use. Can you explain how your M-Type brake pads are able to minimize these issues and can you tell us some more of the benefits they bring customers?
First I will explain how we are able to reduce dust. This black powder that we all refer to as dust tends to be considered brake “pad” dust but it primarily comes from brake discs. We first needed to figure out a way to avoid scratching the brake discs. If we use standard NAO (Non Asbestos Organic) type brake pads the disc won’t be scratched as much, but at the same time, the friction coefficient may not become as high as some car enthusiasts want. Then, if we try to increase the friction by adding more abrasives, more powdered dust is generated. We solved this issue by changing the mix of materials to maximize one of the two friction mechanisms, adherent friction, the other being abrasive friction. This has resulted in a high-performance brake pad, ultra-low dust brake pads without sacrificing the braking power.
The other benefits for users are economical and that comes down to the durability of the part. These M-Type brake pads will last longer when compared to other typical parts being produced in Europe, and they also prolong the life of the brake disc.
It is known to be very difficult for newer companies to find their footing in Japan and DIXCEL is a relatively new company, established in 2003. What have been some of the challenges your company has had to overcome during your short history?
Parts like our M-Type brake pads are now sold by some other companies, but they are very expensive. Those competitors produce in very small lots. Lower production efficiency combined with expensive labor and material costs naturally leads to expensive products. We decided to solve this problem.
Before establishing this company, I worked for the Japanese branch of the British Brake Company. However, that company was purchased by a major US car parts manufacturer. It meant that the British Brake Company was transformed into a company that dealt with car parts as a whole. I didn’t want to work for a company that was shifting from a specialist to a generalist. I dealt with the brakes in the company so when I quit, I decided to establish a company that specializes in brakes. I dreamed of providing happiness to Japanese users. In 2000 I began collecting investors and finally, in 2003, I was able to establish DIXCEL.
Could you tell us a little more about your original R&D strategy when establishing the company and are there any new approaches in product development that you are working on that you can showcase for us today?
Twenty years ago, when the company was founded, there was a boom in sports cars, and the industry as a whole emphasized the results of road/track tests with actual vehicles. Recently, the demand for brake parts has diversified, and to meet various demands, the use of high-precision testing equipment is progressing at our company. The ultra-low dust brake pads M type is one of the newer demands from the market, and we have cultivated this new trend utilizing our R&D abilities. Specifically, we have been utilizing a full-scale dynamometer and not only use the data for product development but also publish it to end-consumers so that they can choose the right product for a better user experience.
When it comes to developing products a common theme we hear from companies is the idea of partnerships and collaborations to leverage knowledge and expertise in order to create new products and improve existing product lineups. Can you tell us the role that partnerships play in your business model and are you currently looking for any new partnerships in overseas markets?
We do have a contract manufacturer that is involved in foreign markets which means we do have distribution in foreign markets, however, it means that we don’t have any joint ventures at the moment. This doesn’t mean that we aren’t interested and we have been considering the possibility of joint ventures in the future. To this end, we are considering a joint venture inside Japan.
Your firm has had a presence in China since 2011 and you’ve also mentioned contract manufacturers in foreign markets. Going forward, which countries or regions do you believe have the most potential for your firm?
We are planning to participate in the US exhibition therefore we are targeting the US market. Currently, we don’t have any business in the US market because of the difference in commodity prices between Japan and the US over the past 10 years. The salary and commodity price in the US was 2.5 times lower ten years ago, however, the Japanese salary and commodity price has not changed for 10 years now. Therefore, if we sold our products 15 years ago in the US market the price would have been 2.5 times higher than in the current situation, meaning that 15 years ago we could not compete in the US. With the commodity price getting higher and the JPY getting weaker, now is the opportune time to target the US market so we are looking into the correct strategy to do so.
Imagine that we come back in four years and have this interview all over again. What goals or dreams do you hope to achieve by the time we come back for that new interview?
It is difficult to say since my goals change every year. What I say now might very well change by the time you come to interview us again. I haven’t set any specific targets such as sales or headcount. Instead, I’m always thinking about what the company cannot do and then turning things around and adding that to our company’s abilities by the end of the calendar year. In this way, we believe that we have captured the potential needs of end consumers and made it more readily accessible for them at affordable prices.
My goals for 2028, 2030, and 2040 are very conservative, but I want our company name to be listed first anytime a person searches for brake pads. I want to keep this status for the next 50-100 years.
0 COMMENTS