Electric Cars Threaten Japan's Industrial Heartland
Bloomberg Businessweek|August 20, 2018

Auto suppliers in Aichi are bracing for the eventual demise of the combustion engine.

Electric Cars Threaten Japan's Industrial Heartland

Tetsuya Kimura is nervous. The company he runs, which makes engine parts, was already in an endless cycle of cost-cutting to stay competitive. Then last fall the head of his biggest client, Toyota Motor Corp. President Akio Toyoda, began warning that a “once-in-a-century” upheaval threatens the industry’s very survival.

Toyoda wasn’t talking about President Trump’s trade war, though that risk looms as well. He was warning about ride-sharing, electric cars, and driverless vehicles, all troubling innovations for anyone whose living depends on the combustion engine. Japan’s government added pressure last month with the announcement that it wants manufacturers to stop building conventional cars by 2050. While that’s a distant date, China—the world’s biggest car market—already has a goal of 1 in 5 vehicles running on batteries by 2025.

The issue for Japan’s Aichi prefecture, where Toyota and hundreds of suppliers including Kimura’s Asahi Tekko Co. are located, is that electric vehicles use about a third fewer parts than today’s average car. Here’s a sample of what you won’t find in an EV: spark plugs, pistons, camshafts, fuel pumps, injectors, and catalytic converters. For the prefecture’s 310,000 autoworkers, retooling would mean painful downsizing, with far-reaching effects for Japan’s industrial heartland. “It takes out whole geographical areas,” says Rob Carnell, chief Asia-Pacific economist at ING Bank NV in Singapore. “The hairdressers and the local mom and pop shops, and all of the businesses where the autoworkers would have spent money— they all get hit, too.”

This story is from the August 20, 2018 edition of Bloomberg Businessweek.

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This story is from the August 20, 2018 edition of Bloomberg Businessweek.

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