Special article of the InstituteIt's never easy to see the subtleties. But noticing some phenomena makes it impossible to speculate about the future it may imply, despite the risks involved.
Recently, several large integrated electromechanical enterprises in Japan have coincidentally ** their shares in auto parts companies.
Hitachi Manufacturing Co., Ltd. plans to transfer a 20% stake in its subsidiary, Hitachi Astemo, to Honda, a state** Industrial Innovation Investment Organization (JIC) and Honda6%, upon closing, Hitachi's shareholding will increase from the current 666% to 40%. The closing process was originally scheduled to be completed in September 2023, but the latest news says that it will be postponed to December.
Astemo was formed in January 2021 by the merger of Hitachi's wholly-owned subsidiary, Hitachi Automotive Systems, and two parts subsidiaries of Honda, with the main purpose of the merger to focus on the development and production of electric vehicle parts. At that time, it was generally believed that the new company led by Hitachi would have more investment in electric vehicle parts and become the mainstream enterprise of electric vehicle parts in Japan, but it was not expected that in less than three years, there would be great changes. After the completion of the equity transfer, Astemo's operating data will not need to be reported to Hitachi's head office.
Panasonic announced on November 17 that it would sell a majority of its subsidiary, Panasonic Automotive Systems (PAS). Panasonic Automotive Systems focuses on automotive cockpit systems, ETC in-vehicle devices, on-board chargers for electric vehicles, and other components, and its business is closely related to autonomous driving. According to public reports, the U.S. "Apollo Global Management" (Apollo) will become a strategic partner of Panasonic Automotive Systems, and the specific details of the agreement with Panasonic will be finalized by March 31, 2024.
In addition, Mitsubishi Electric will also spin off its automotive machinery business from its head office by April 2024 and no longer engage in car navigation business.
Why are the above-mentioned major Japanese companies in the ** auto parts business?For example, Denso announced in 2022 that it would spend 10 trillion yen (about 500 billion yuan) in R&D and equipment investment in the next ten years, and the German Bosch company will spend as much as 12 billion euros (about 93.5 billion yuan) in R&D in 2022.
But this interpretation does not conform to market logic. It is always the project's return prospect that determines investment, not the difficulty of financing. Companies such as Astemo and Panasonic Automotive Systems did not lose money in operation, but their profit margins were not high. Panasonic Automotive Systems' sales in 2022 were 12 trillion yen, but profit is only 16.2 billion yen, operating profit margin of 13%, this level of profitability has lowered the profit margin of the entire Panasonic Group, making investors feel that Panasonic's overall operating efficiency is not good. By divesting the auto parts company from its financial relationship with the head office, Panasonic will be much closer to its target operating profit of 10%.
Therefore, it is worth further asking whether there are more Japanese parts companies with low profits
According to the 2023 TOP100 list of global auto parts manufacturers released in June this year, Japan is still the number one power in the field of auto parts. But trends show that the status of the number one power has been severely impacted. In the 2023 list, a total of 15 companies have experienced a decline in revenue, of which 6 are Japanese companies. Both the number of companies with declining revenues and the amount of declining revenues are the largest among major countries (including the United States, Germany, China, and South Korea). The ranking of companies is even more obvious, with 17 of the 22 Japanese companies on the list remaining unchanged or declining, reaching 77%.
Why did the rankings and revenues of Japanese companies fall so sharply?Take, for example, Aisin Corporation, which ranks seventh in the TOP100 (second only to Denso among Japanese auto parts companies). The company acknowledged at its mid- to long-term management strategy briefing that it recognizes that the two most important trends in the automotive industry today are electrification and intelligence, and that these two areas are areas in which Aisin and the Japanese automotive industry as a whole are relatively weak. Aisin's strongest products are 6AT and 8AT gearboxes, as well as engine parts, body and braking systems, which are the main components of the gasoline vehicle era, however, these products are destined to decline under the impact of the global wave of new energy vehicles.
The strength of a country's automobile industry depends not only on the vehicle companies that consumers are familiar with, but also on the leading businessmen behind it who are not noticed by the general public. From this point of view, does the above-mentioned auto parts business being "disliked" by several major mechanical and electrical companies and the decline in the global status of Japan's auto parts industry also hint at the worrying prospects of the Japanese auto industry?
In 2022, electric vehicles accounted for about 10% of global car sales, but only 1% of electric vehicles were sold in Japan7% (Toyo Keizai Weekly November 18, 2023 issue) In the future, should Japan catch up in the field of electric vehicles, or should it bet further on gasoline vehicles?Too many car companies (including parts companies) are undecided. There are also some Japanese companies that insist that electric vehicles do not necessarily represent the future of the industry, just as they believed that smartphones do not represent the future of the mobile phone industry, or firmly believe that plasma TVs represent the future of the TV industry.
The author is Chen Yan, Executive Director of the Japan Enterprise (China) Research Institute