Electric vehicle revolution crushes auto parts makers in struggling small towns of Japan, East Asia

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TOKYO (BLOOMBERG) – Fuji Oozx is one of hundreds of auto parts suppliers in Japan whose very existence is threatened by the world’s evolution towards electric vehicles.

For nearly 70 years, the company has been manufacturing intake valves, an essential part of any gasoline car that controls the flow of gas into and out of an engine’s cylinder. Usually made of copper, they are lightweight and very heat resistant, and use decades-old technology that is not needed in any electric car.

“We need to start looking for a new business,” President Satoshi Tsujimoto, 63, said from his office adjacent to the Fuji Oozx factory in Shizuoka Prefecture, an elongated region along the coast of the Pacific Ocean. . “We have no choice but to fight for our survival. We will have to find an answer within the next decade.”

Fuji Oozx supplies automobile manufacturers including Toyota Motor and Nissan Motor. Valves for boat engines are an option, but the board of directors of the Tokyo-listed company is also looking further, such as diversifying into medical devices.

Mr. Tsujimoto’s predicament is one that other traditional auto parts suppliers around the world are facing as the industry accelerates its move away from the combustion engine. Either they make the switch or they find whole new avenues of business.

The situation is particularly dire in Japan, where the government has pledged to become carbon neutral by 2050. A key element of this will be the transition to cleaner cars, which currently only account for around 1 percent of vehicles, up from 30 percent in parts of China, the global pioneer of electric vehicles.

Management consulting firm Arthur D. Little predicts that up to 300,000 jobs could be lost in Japan if the auto industry switches completely to electric vehicles, which equates to about 10% of all current jobs in the industry. In the United States, it is estimated that some 75,000 jobs could be lost if battery-electric vehicles made up about 50% of national auto sales by 2030.

“It’s the boiled frog phenomenon,” said Kensuke Sobue, consultant to Arthur D. Little. Japan is slowly but surely at risk of losing jobs as other countries, especially China, nurture the electric vehicle industry, creating job opportunities.

Shizuoka is home to a myriad of auto parts suppliers who count some of the biggest names in the industry among their customers. It is one of Japan’s hubs for combustion engine auto parts makers, accounting for more than half of the prefecture’s supply chain in 2018, according to figures from the Shizuoka Economic Research Institute.

After World War II, Shizuoka flourished. In the 1960s, the coastal town of Hamamatsu, home of the legendary motorcycle makers Yamaha Motor, Honda Motor and Suzuki Motor, where a theme park for cars and motorcycles still stands today, produced the highest number of two- wheels to the world. .

Motorcycle production peaked in the early 1980s, but Hamamatsu embraced gasoline-powered cars. Ten years ago, the city had around 2,000 auto parts manufacturers supporting nearly 100,000 jobs. As Hamamatsu’s other two major industries – textiles and musical instruments – declined as cheaper manufacturing centers appeared elsewhere in Asia, auto suppliers held their ground.

Now, it’s hard to see how they can hold back the rising tide of electric cars for much longer.

Honda has said it will not sell combustion-engine cars beyond 2040 and urged suppliers to get on board. Even Toyota, somewhat lagging behind when it comes to going all-electric, launched a new series of battery-electric vehicles, Toyota bZ, in April as it strives to establish a full line of electric vehicles, which would include hybrids and fuel. cellular cars, starting with 70 models by 2025.

Conventional cars have around 30,000 parts, many more than electric ones, which can run without engine blocks, fuel pumps or mufflers. There is also competition from China, where inexpensive small electric cars are mass produced by the thousands.

The authorities in Shizuoka are aware of the coming revolution. In 2018, they created a next-generation automotive institute to help auto part manufacturers develop new components for electric vehicles. The organization receives funding from Japan’s Ministry of Economy, Trade and Industry to help businesses make the transition.

“We felt this sense of crisis long before the announcement of Japan’s carbon neutrality,” said Mr. Eiji Mochizuki, director of the research institute. But while the big vendors plan to adapt, the smaller ones are still sleeping, he said. “We are trying to wake them up.”

It might be easier said than done. Many small suppliers are already surviving on very slim margins, depending on the tactics employed by powerful buyers like Toyota who often pit parts makers against each other and choose whoever can make the cheapest widgets. Spare money to expand into another area does not exist.

“Honestly, it will be difficult to survive,” said Mr. Masakatsu Suzuki, 56, owner of Masa Engineer, a small company that manufactures equipment for assembling and testing auto parts. “I would like to be able to make an active gesture. “

Mr. Suzuki has been in business for approximately 25 years. He is worried about how he will pay his four workers as electric vehicles become more popular; automobiles he compares to the cheap panda cars at amusement parks – “all you need is a battery, a steering wheel and a chair.”

Others just don’t see EVs as an immediate threat.

Mr. Yaichi Sakai runs Hamamatsu Gasket, a family business passed down from his father. Among other things, the 67-year-old company manufactures cylinder head gaskets, which provide a seal between an engine block and the cylinder head and prevent coolant or engine oil from seeping into the cylinders. Although cylinder head gaskets are not required in electric vehicles, other types of gaskets protect an electric car‘s engine from dust and water.

“I don’t have the feeling of crisis now because gasoline cars will not immediately go to zero,” Mr. Sakai said. He estimates that around 20% of Hamamatsu Gasket’s products will not be needed in the age of electric vehicles, but says sticking to parts for engines always pays off in the short term.

“Small businesses like us don’t have the financial strength,” said Sakai, who dropped out of high school to learn the trade. “We just need to focus on the task ahead.”


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