To start with the Japanese auto industry, I still vividly remember my business trip to the 29th Tokyo Motor Show at Makuhari Messe convention center in Chiba, Japan late October 1991. I was fortunate to experience a prosperous auto industry during the pinnacle of the Japanese economic bubble when the expo attendees surpassed 2 million and sat at 2.01 million 850k, an all-time peak for Tokyo Motor Show. After I arrived in Tokyo on 28th October, I attended the expo for four consecutive days, from 29th October to 1st November. The show’s theme was “Discovering a New Relationship: People, Cars, and the Earth as One.”
The most impressive part of the show was the 7th hall’s EV exhibit, where almost every Japanese automaker echoed the environmental theme of “People, Cars, and the Earth” with EV concept demonstrations. In the early 1990s, when the Japanese car industry was at its prime, Japan’s domestic car sales alone boasted 7.77 million units in 1990. Hence, as the leading nation in the global auto industry, a dedicated hall for EVs at the Tokyo Motor Show to acknowledge the emerging environmental concepts was no surprise.
In 1997, Nissan launched Prairie Joy, the world’s first lithium-battery EV. In 2011, Mitsubishi’s i-MiEV became the first EV to sell over 10k units. These all point to Japanese automakers’ strengths regarding EVs. However, in 1997, Toyota launched its hybrid Prius, which utilized the more economical nickel metal hydride battery to gain market recognition, netting over 1 million sales in May 2008 alone. The success of Prius directly slowed Japanese automakers’ EV investments. Even till September 2021, Toyota's President and JAMA Chairman Akio Toyoda emphasized his reluctance to follow Western countries’ BEV strategies unless the Japanese government had holistic supporting measures. The above contributed to a less than 3% global BEV market share for all Japanese automakers in 2022. With 200k units, it’s even less than Korea’s Hyundai Group alone (Hyundai’s first three quarters in 2022 performed nearly 250k sales). As a result, despite Toyota, Nissan, and Honda’s claims within the recent two years to introduce at least thirty new EV models by 2030, these companies will probably miss any market opportunity before 2025 for the global EV market with at least 50% annual growth. An international car supply chain reform is inevitable with such shifts in auto market sales.
New Toyota President Akio Toyoda mentioned the year before last that Japanese automakers manufacture roughly 10 million cars annually, of which 50% is exported (Japan’s domestic car sales in 2022 fell to a new low in 45 years with only 4.2 million units). Should the government ban ICE car manufacturing, Japanese automakers would take a big hit, leaving only two options: cease production or manufacture overseas. It would also severely impact the Japanese economy and eliminate 5.5 million job opportunities. This, on some level, explains that the rise of the EV industry will cause a paradigm shift. After all, EV manufacturing parts are vastly different than traditional ICE vehicle components, and their cost structures are stark opposites. Hence, most Japanese auto component suppliers in Toyota’s supply chain can barely fend off the EV industry’s market invasion.
On the other hand, this will be another chance to grow Taiwanese industries, which have always been the leader of the ICT industry. We can see Taiwanese enterprises are beginning to flourish in the up-and-coming EV supply chain with electric motors, gearboxes, transformers, charging cables, and charging posts, creating many job opportunities. What’s more exciting is that when Japanese automakers invest in EV assembly lines, they have to invite Taiwanese manufacturers into the mix. For example, Fukuta, based in Tongluo, Miaoli, exclusively supplies Mazda’s EV drivetrain in Hiroshima, becoming the first Taiwanese company to set up a joint venture, MCF Electronic Drive, to manufacture auto parts. Fukuta directly built twenty-two customized powertrain system assembly lines in Taiwan for Mazda. Moreover, Taiwanese auto supply chain giant Hota Industrial Mfg’s Chairman Guo-Rong Shen even remarked: “Taiwan can probably supply any auto part aside from batteries,” lamenting the slow development progress of Taiwan’s current battery industry.
Global EV sales in 2022 stand at roughly 8 million units and aim to surpass 20 million units by 2025. Regarding this market opportunity, aside from vertical integration in supply chains (such as BYD’s total control over lithium resources, triad (battery, electric control, motor) technologies, and auto semi-conductors & whole-vehicle manufacturing), the Taiwanese tech industry can utilize its advanced technologies and reasonable manufacturing costs to find their foothold and even form strategic alliances with world-class manufacturers to explore EV’s immense market opportunities as global EV sales soar.
The most recognizable case was Delta’s MoU signing with auto semiconductor manufacturer NXP in December 2022 to accelerate its EV development by setting up joint laboratories to speed up product development & verification processes, lower development costs, and improve the efficiency, power density, and system integration of OBCMs, DC/DC converters, and traction inverters. In conclusion, we can study these real-life cases to glimpse into the foreseeable future (2025), where the Taiwanese and Japanese auto industries and supply chains transform quantitatively and qualitatively.
About the author - Kenny Liu
Graduated from Dept. of Aeronautics and Astronautics, Cheng Kung University in 1988, started his auto industry career since July 1990 after two year military service. Starting as a service engineer and a temp technician, product marketing specialist in Peugeot/ Daihatsu, marketing and dealer channel specialist in VW LCV from March 1992, then field manager in GM Taiwan from Feb. 1994, sales and service / parts head in Ford Lio-Ho from Sep. 1998 till retirement in May 2019. Kenny then started to work for JLR Taiwan as sales/service head and consultant/ lecturer. After that, he was invited to work at a Suzuki dealer of Taipei as the general manager until April 2022.