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The Japanese leader in washing machines for cars and trains

Interview - March 13, 2023

As Japan’s oldest vehicle washing machine manufacturer, JCW knows a thing or two about removing grime to really make vehicles shine.

NAOHIRO MASUDA, PRESIDENT & CEO OF JCW.CO., LTD.
NAOHIRO MASUDA | PRESIDENT & CEO OF JCW.CO., LTD.

Over the past 20 years, we have seen Japanese manufacturers face very stiff price competition from regional neighbors with a lower cost of production, pushing Japanese electronic brands out of mass production markets, for example. However, we still see Japanese firms remain extremely competitive in certain niche areas, often characterized by high-mix-low-volume production. How do Japanese companies like yours maintain their competitiveness despite this stiff price competition from their regional neighbors?

It is inevitable for Panasonic, Sony or other home appliance manufacturers to experience a decrease in their production. I think it is the natural development of the country. For example, the UK also evolved in home appliances, which was eventually taken over by countries with a cheaper labor force. Japan is not the only country strong in B2B; UK's Rolls-Royce is also excelling in B2B. Fortunately, Japan is located in the Asian region, where many countries are yet to develop and have a big leeway for further development. I feel that Asians, especially in Thailand and Indonesia, do not feel comfortable with Europeans, Africans or other races. Because the Japanese are well-received by these Asian nations, they have an advantage over European countries in penetrating the market. On the other hand, Japanese companies are struggling in Europe. Japan is strong in B2B because Japanese firms, especially SMEs, offer a higher quality than countries. I spent half a month outside Japan. We have bases in New Delhi and Jakarta. Working with people across the globe made me realize that, on average, the Japanese are on a higher level. In Japan, you can expect to be served a drink when you go to a company, which highlights that their hospitality mindset is different. The noteworthy hospitality of Japanese companies is also embedded in their products.

 

Japan is very famous for its major brands like Toyota, Honda or Sony. However, only a few people understand that the Japanese manufacturing sector is supported by chusho kigyos. These SMEs represent 95% of employment and 50% of added value manufacturing output, and they often provide the services, parts and machines that sustain the operations of big companies. What do you think is the role of Japan’s SMEs in supporting the national economy and supply chain?

Although SMEs are categorized under SMEs by the banks, the management does not consider themselves as an SME. Even an SME with only two employees would do its best to be number one in the field, which differentiates Japanese from non-Japanese companies. Non-Japanese companies are good at the launching stage, so their growth in the first year is exponential. Conversely, most Japanese companies do not grow in their first year because when their management launches a company, they consider their business to be a lifetime work. Overseas companies, however, often sell their business when the value increases. We have different mindsets. Japanese SMEs are more serious. The negative aspect is that if there is no successor, then the company gets discontinued. On the contrary, once an SME finds a good successor, it often grows based on its experience and know-how.

 

Japan is the oldest country in the world with a negative demographic line, creating two major challenges. First is the labor crisis, in which it is not only harder to find successors but also to recruit young graduates who can learn manufacturing skills. The other problem is the shrinking domestic market. From your point of view, what are the challenges and opportunities that Japan’s decreasing demography is creating for your company?

As a Japanese company, I have a strong affinity toward this country. Still, we need to objectively look at the country’s economy. Japan’s economy will surely continue to decline. One of the options to mitigate the diminishing population is to welcome foreign workers, like the European immigration policy. However, the Japanese are typically allergic to foreigners. If the Japanese government pursues the policy for immigration, its citizens will certainly go against it. Regardless of business or work, Europeans and Americans communicate with multiracial people. Since most Japanese have never been to other countries, they usually do not know what is happening overseas. Even if only Japan and China are continuing with the mask mandate, Japanese people do not question that directive. They do not acknowledge the grave situation of the country’s population decline and the diminishing workforce. The majority of Japanese citizens are against the foreign immigration policy. Only those working overseas understand the importance of supplementing the labor force with foreign workers.

 

One of the solutions besides foreign labor and the perfect answer for many industries is automation. In the case of your company, what innovations or pioneering technologies have you introduced to the market? How are automation and labor-saving devices helping with this demographic decline?                                

Innovation is doing something new. Our company’s credo is to give happiness and surprise to our customers, which is the same reason people purchase iPhones. I believe that is the core essence of innovation. We continue to move our customers’ hearts through our washing machines. We have experienced many failures, but those were necessary to provide new happiness and value to our customers. It is natural for a company that goes through something to become more conservative and stop pursuing new developments. There are many conservative companies, especially in Japan and Asia. Japanese companies need to continue to go abroad and find new ideas to develop new products and make their customers happy. Today, there are no mobile phones made in Japan. About 10 or 15 years ago, Sharp, Panasonic and Kyocera used to make cell phones, but they got tired of providing new happiness to their customers. I believe that losing that spirit is the end of a company.

 

Your track record reveals that you have many clients in Hokkaido, where extreme temperatures in winter are experienced. How are you able to provide your washing equipment in places with tough climates like Hokkaido without running the risk of failure or frozen pipes?

We have developed many technologies. The objective is the point of differentiation. It is whether we want to make sure that it is not freezing or to ensure that it is washing the vehicle. The majority of companies set their respective goals and rules. However, there is often a discrepancy between the goals and objectives of manufacturers and customers. I feel that most of the time, the manufacturer's objectives are not what the customer needs. When we made the products for Hokkaido and similar areas with severe climate conditions, we had to first disregard common sense. We are free to do anything once we receive the approval from our customers that we can build anything that can stand against -30 °C. Hence, everything has to be clarified with our customers. We first discuss with them and receive their approval with regard to the cost, structure and the time it takes to wash.



Your company has strength in creating washing machines, mainly for trains and various types of vehicles. The Wash Mist is different from your other products because it is for disinfecting personnel, such as at factory floors and various logistic bases. Although it is outside your main business, why did you decide to manufacture the Wash Mist? Looking at the future, are you looking to further develop products such as the Wash Mist and move a bit away from washing machines for vehicles?

To put it simply, I was stupid. When the pandemic hit, I was one of the four people in our company who were at one of our overseas bases in the Philippines, Singapore and India. We were forced to come back to Japan. Those working overseas usually do not have any work to do when they come back to their home country, which was what happened to the four of us. In all companies, they consider those who have worked overseas to be elite. During COVID, we have seen alcohol distillation, so we thought about developing an air shower like in Star Trek. No one has ever tried making that. As the oldest vehicle washing machine manufacturer, I thought it would be interesting to build something like that and surprise everyone. Since we have been manufacturing washing machines, we are experts in water and air. It was very easy to come up with this Wash Mist technology using water and air. A common thing throughout the industry is that something easily made by a company may not be effortlessly understood by others, which is likely because the company's staff are not aware of the advanced technologies they own. Whenever we develop a product, the concept is whether we can surprise or make people happy. In the morning, I attend sales and design meetings. I only say no to ideas that are contrary to our product development concept.

 

Due to severe environmental deregulation, the world's manufacturing sector is trying to develop technologies that lessen the environmental burden of the industry. The Suga administration announced that Japan will become carbon neutral by 2050. What technologies is your firm developing to make your products more eco-friendly and energy efficient?

We provide a system technology that recycles 100% of the water used in washing for our customers like railway companies. Since we utilize water and electricity to operate our machinery, we continually do research and development to minimize the usage of these resources. The dilemma is that pursuing more environmentally-friendly options increases the cost. We are in the transportation and infrastructure industry, which is needed by developing nations. However, developing nations often have a limited budget, and they are not very considerate of the environment. Overseas companies like us have to compete with local companies that ignore environmental factors and make cheap machines. In the competition, our profit is low or could be even nothing at times. Profit is important for business, but we are not very concerned with profitability. Our products will definitely remain for 10 to 20 years, even after I retire. Therefore, I want to create machinery that will not fail to continue astonishing engineers 10 or 20 years later.

 

Are you looking for partnerships, even for maintenance or sales opportunities, for your business? If so, which countries will you focus on?

We have already established a network in several countries. However, it is difficult to convey our ideas and thoughts to them. We are working on the Indian high-speed train system, and there are about 20 local companies that are requesting to do a joint venture with us. Unfortunately, the majority of those companies are not considering their customers, so it is taking time for me to determine which is the right partner to work with.

 

Could you run us through your international strategy? Which overseas markets do you believe to have the greatest potential for your company?

India would be one of the countries with the most developed transportation and infrastructure. Its current population is about the same as China, and in a few years, it will go beyond China. However, the country's infrastructure for transportation is yet to be consolidated in terms of railways, buses and automobiles. At this point, India is the most important location for our business.

Although Indonesia is smaller, it would be another country that requires infrastructure for transportation.

 

Do you see the current macroeconomic climate more as a challenge or an opportunity for your business?

I feel that sales competitiveness is declining because the supply chain is interconnected globally and purchasing prices have gone up. With the depreciation of the Japanese yen, it may be easier to sell, but the cost of manufacturing has increased. Hence, the overall profitability decreased. The salaries in Japan are very low compared to other countries. Foreigners are always surprised to know that Japanese wages are so low, yet they are asked to do so much. However, that is the result of Japanese people overworking, which has to be reset at some point. Companies dependent on exports are hit hard. There are Galápagos mobile phones in Japan, but Japan itself is Galápagos.

 

If we were to come back in four years for your 70th anniversary, is there a particular goal or a personal ambition that you would like to have accomplished by then?

Our current target is to become number one in washing technologies instead of washing machines. I believe that Japan is superior in its mindset in washing. The Japanese being very meticulous about hygiene is reflected in all their products. Leveraging this Japanese characteristic, we want to install and launch the same cleanliness in other places in the world. My staff laughs when I tell them that cleaning is not only within the Earth. I am not like Elon Musk, but there is space debris that we can clean as well. Based on our business pillar of washing and cleaning, we are looking forward to opening a new business. Within the next two years, we are focusing on India and securing a share of the Indian market. I was in charge of the Chinese market in the past, but that did not go well because of geopolitical issues between Japan and China. With our experience in China as well as the absence of geopolitical issues in India, we can fully immerse ourselves in that market. My idea may be childish, but we have to go through a bidding process with other companies in order to enter a new market. We compete with English, French or Spanish companies. I want them to view our company as complicated and burdensome because that would mean we have won the market. We need to have a concrete target in order for us to successfully claim a market share. I am truly enjoying my work. I like to make my customers happy, and I find delight in working as a salesperson in the industry. How much I enjoy my work will surely determine the outcome in four years, on our 70th anniversary. In order to be able to boast and be proud of our company, I would like to keep enjoying my work.

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