A new report published recently on Bloomberg has said that the Japanese automakers may have to consolidate into three or fewer groups. The top reason being: Japan’s auto industry is too crowded and to cut on development costs, there may be no more than three companies in Japan like other major markets.
Currently, there are eight automakers in Japan: Toyota, being the world’s largest, Honda, Suzuki, Nissan, Fuji Heavy (Subaru), Mazda, Mitsubishi and Daihatsu, which was recently acquired by Toyota Motor Corp. for a sum of $3.2 Billion.
It was the largest acquisition in Toyota’s history, and will bring down the total automakers in Japan down to seven. The 109 years old company opted into the buy-out owing to the high cost of keeping up with investments in green powertrains and automated driving systems. President of Daihatsu, Masanori Mitsui said that Daihatsu was struggling to keep up with the rise of electric cars, and autonomous and connected-car technologies.
“If we want to overcome the upheaval in our business environment and the fierce competition to develop new technologies and emerge stronger than ever before, we must dramatically strengthen our collaboration with Toyota,” Mitsui said at a press conference on Jan. 29 with Toyota President Akio Toyoda. Daihatsu’s resources are “not enough for us to be called a truly global company,” he said.
Takaki Nakanishi, an analyst at Jeffries Group LLC investment banking firm said that this marks the beginning of consolidation within the Japanese automotive industry that is currently spread out and is wasting resourcing. Taking trends from the European market, where VW led the charge with the purchase of Porsche, Lamborghini and Audi, with Fiat’s Sergio Marchionne also merging with Chrysler (one of United State’s big three) with Fiat of Italy.
Toyota has 5.2 trillion yen in cash and short-term investments that is more than what the other six Japanese automakers have, and even its forecasted R&D spending of 1.06 trillion yen for the year ending in March is more than the combined R&D spending of Fuji Heavy (Subaru), Nissan, Mitsubishi, Mazda, and Suzuki. Even though Nissan has a partnership with Renault with the same CEO, Carlos Ghosn, who enjoyed a superhero type respect in Japan for bringing out Nissan from its crisis.
The 660cc cars in Pakistan, for example, take a lot of development and have a market limited to just Japan, and automakers increasingly developed the 660cc automatic cars, also known as Kei cars, to cut down on development cost.
Right now, none of the automakers are denying nor accepting for what will happen in the future, but it is likely that many automakers will join hands by 2020, as Mazda’s Executive Officer for financial services told reporters, “we don’t know what will happen in the future.”