Hundreds of automotive parts suppliers in Japan existence are threatened with the shifting to electric vehicles globally. Among them who will be impacted is Fuji Oozx.Inc.
Fuji Oozx has been making intake valves for almost 70 years. The valve is an essential component in a gasoline car as it controls the flow of gas in the engine’s cylinder. This component is light and heat resistant and made from decades-old technology, and is now not needed in an electric car.
Satoshi Tsujimoto, president of Fuji Oozx’s, said, “we have to start looking at new business opportunities.”. Oozx supplies valves to Toyota Motor Corp and Nissan Motor made from its factory in Shizuoka Prefecture, a region on the coast of the Pacific Ocean.
The company is looking for alternative and boat engines are one of the options since it uses valves. The board is also exploring diversifying into medical devices as Tsujimoto feels they have no choice but to fight for several.
Another worry for Tsujimoto is that other suppliers of traditional automotive parts are confronting even as the car industry is accelerating away from combustion engines. These suppliers will either have to make make a shift or find new business avenues.
As per Bloomberg news, the situation in Japan is acute as the government has pledged to become carbon neutral by 2050. This will include moving to cleaner cars that presently account for only 1 % compared to 30% use in China, the leading EV segment.
According to Arthur D. Little, a Management Consultant firm, Japan could see 300,000 job losses, around 10% of the total job, if the automotive sector shifts entirely to electric vehicles. In the U.S. jobs losses are estimated at 75000 by 2030 if 50% of the car sales become battery operated.
“It is a boiled frog situation” is how it is put by Kensuke Sobue, a consultant with Arthur D. Little. Japan is slowly risking losing jobs like other countries led by China, nurturing the EV sector and creating employment opportunities.
Shizuoka is home to many automotive parts suppliers and has some of the industry’s biggest clients. As per reports from Shizuoka Economic Research Institute, it is a key hub for combustion engine car parts manufacturing facility and made up half of the supply chain in 2018. Shizuoka flourished after World War II.
The coastal city of Hamamatsu was churning out the most two-wheelers anywhere in the world as it was home to Yamaha, Honda, and Suzuki.
The motorcycle production peaked in the early 1980s, but Hamamatsu embraced fuel cars. Till a decade back, it has around 2000 auto parts manufacturers supporting 100,000 jobs. The other two industries in Hamamatsu, textiles and musical instruments, declined as cheaper manufacturing hubs came up in other parts of Asia. Auto suppliers survived then, but it is to be seen how they can push back the rising EV tide.
Honda had confirmed that it will not sell vehicles with combustion engines beyond 2040, while Toyota, which has been laggard when it came to EV, has already rolled out a new battery electric vehicle series, Toyota bZ, in April. Eventually, it plans to roll out a full lineup of EVs, including the hybrid and fuel-cell cars with 70 models planned by 2025.
Conventional cars have 30000 more parts than electric ones. The EVs do not require engine blocks, fuel pumps, and mufflers. The authorities in Shizuoka are aware of the impending revolution. In 2018, the next-generation car institute was set up to help parts makers develop into EV parts. This institute gets its funding from the Ministry of Economy, Trade, and Industry to help businesses transition.
Eiji Mochizuki, the head of the research institute, said they had sensed the crisis much before going carbon neutral. While the larger suppliers are planning to adapt to the changes, the smaller ones are still sleeping. It is not easy for smaller suppliers as they were already operating on wafer-thin margins. This was due to Toyota’s tactics to pit one supplier against another and extract the lowest price. There is no spare cash for these suppliers to expand.
Masakatsu Suzuki, a 56-year-old owner of Masa Engineer, is a small business and makes equipment to check and assemble auto parts. He has been in business for the past 25 years and hopes to move. He worries about how to pay his four workers. He compares the EV to a cheap panda car at amusement parks that needs a battery, a chair, and a steering wheel.
Others do not see an immediate threat. A 67-year-old company, Hamamatsu Gasket, a family-owned business run by Yoichi Sakai, manufactures cylinder head gaskets, which seal between a cylinder head and an engine block to prevent the engine oil or coolant from entering leaking into the cylinder. The cylinder-head gaskets are not needed in EVs, and there are other sorts of seals that shield an EV from water and dust.
According to Sakai, he does not see the gas-driven cars become nil immediately. He estimates 10% of Gasket deliveries will suffer in EV Era and is sticking to parts for engines as they have more profit margins.
