A car is more than merely the sum of its parts – it is the product. Japanese automotive suppliers often invoke
, ascribing "manufacturing craft" to mass-produced auto parts. Yet, living up to the reputation for price performance has become exceptionally challenging for Japanese manufacturers.
suggest the COVID-19 pandemic has longer-lasting effects than initially hoped. Disrupted supply chains hamstring Japanese carmakers from their subcontractors, undermining the high demand for passenger cars. On top, soaring energy prices exacerbated by
threaten profitability. However, the pivotal dilemma might be to adjust products to electric vehicles.
Japanese leaders and their retinue
As Japanese car brands are inherently intertwined with their suppliers, the auto part market resembles that of the automakers. Accordingly, Japanese production satisfies domestic demand, imports are minuscule, exports are substantial, and overseas production of major suppliers roughly equals domestic production value. Toyota is the leading automotive manufacturer (worldwide), generating immense demand for parts -
five of the ten leading Japanese auto suppliers are Toyota Group companies. These original equipment manufacturers (OEM) and an entourage of thousands of reliable tier-one to tier-three suppliers ensure global success. This pyramid-like model outlines the number of companies and their interdependency. While tier-three suppliers below are countless, overwhelmingly small- and medium-sized, OEM and tier-one suppliers comprise a few, mostly large-size enterprises, often wholly or partially owned by the brands. This structure also encapsulates
a business-to-business approach, where sales on the aftermarket, especially to private customers, are of minor significance.
Electrification: Millstone or milestone for auto suppliers?
Although ties in Japan’s automotive industry are strong, not all companies are impacted equally by
the global shift towards electric vehicles (EVs). Naturally, those dealing with internal combustion engine (ICE) parts are in a tighter spot, encouraging a more decisive response to the EV shift. Besides, battery electric vehicles have only recently starred in Japanese carmakers’ announcements. As OEMs are beacons for the supplying industry, the weak resonance to EVs from suppliers is unsurprising. Many prioritize managing the increase of orders for ICE cars, which is likely to persist in countries where the (charging) infrastructure or climate impedes the spread of EVs. Moreover, the latest crises have smothered revenue, discouraging investments by parts suppliers in widely needed research and development (R&D). Regardless, it seems inevitable for auto parts suppliers to adapt to EV policies - independently or in alliances when they lack the resources. Fortunately, the
automotive industries’ overall R&D expenditures paint a more encouraging picture.
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