As sustainable mobility continues to be the dominant theme across automobile markets globally, Japanese companies are slowly opening up to the concept of adapting to changing dynamics in the automotive world. Speaking on the sidelines of the Auto Expo 2020, Masashi Oshita , Vice-Chairman & Executive Managing Director of the Japan Auto Parts Industries Association (JAPIA), says India is a top priority as Japanese companies begin exploring for potential partners to get an edge amidst a disruptive environment.
How are Japanese component manufacturers dealing with the ongoing disruptive times?
This is a very tough time for Japanese component manufacturers because we do not have competitive electric vehicle (EV) parts at the moment. So, we have to earn enough profits from selling conventional parts and invest a portion of that into new technologies. And, in order to do that, we have to keep the competitiveness of the conventional components intact as well and in a way, we have to do all things together. That is a big challenge.
So, if we have sufficient money, we can invest everywhere. But, if we don't have sufficient money, we have to carefully select the fields and invest; we have to prioritise the fields. That is the most critical concern of the top management of several Japanese companies right now.
Having said that, automobiles will not diminish in the future because mobility is a need and will survive, especially in India where the per capita ownership is very less and is set to grow with growing income levels.
The Japan market is shrinking, so Japanese automakers are looking for markets abroad to explore and India is the top priority. This is because markets such as China have so much competition from the domestic companies that it's very hard to flourish there.
We are studying markets to explore. For instance, the African market is a very big market but it's not easy to go directly from Japan; it's easier from India. So, we are looking for new markets in Africa, the Middle East, Central Asia or any other developing economies. India is also a good place geographically because Indian people are everywhere and it's easier to reach different countries from the Indian Ocean as well. ASEAN countries come in the backyard of China.
How well is the Japanese automotive market prepared to deal with competition, especially China?
If we look at price, we cannot compete but we can on quality. We have to compete with Chinese manufacturers on both cost and quality, otherwise we will lose some market share.
The automobile industry is one that needs big investments, so the working ratio is important.
China has the advantage of domestic demand, demand from ASEAN countries because it's the backyard of China and now of course, they have invested in India. In the near future, Chinese bus markets will have a significant market share and then they will target India.
So, if India thinks that EVs are the biggest target, how they can stop importing two-wheelers, three-wheelers and electric buses from China? With subsidies from the Chinese government, cities such as Schenzen are big markets.
If you can manage the cost and demand, it makes sense to set up up a factory and also export the surplus to India. It's not easy to be competitive if you subsidise Indian companies and start giving incentives to consumers and then pull it back, it's not easy to stop incentives. Just look at the Chinese market, consumer demand for EVs fell once the subsidies were taken away. So, incentives cannot be permanent solutions to promote EVs.
We have always been in tough situations. We have so many difficulties such as energy crisis, earthquakes, and while weak companies have shut down, only the strong ones have stayed back and have got the experience of dealing with these challenges.
How open is the Japanese industrial environment to welcoming ideas from start-ups?
Japanese companies are not very much adept at working with start-ups. They are not prepared to accept or open up to innovation as they have always developed things with their own hands and now they don't have any ability to adapt to new technologies. But they are changing their mind and a few companies have understood that they have to change and it is difficult to survive if Japanese companies are not prepared to work with start-ups and IT. We are slowly changing our minds towards it.
How do you see India's approach to the future of mobility with a predominant focus on electric vehicles?
If you are looking at it from the perspective of just reducing the import bill, EVs are not the solution. There needs to be a well-established charging infrastructure for EVs and affordable vehicles as well.
If I talk about Japan, EV is one of the options and how fast it will come depends on the innovation for battery cells. Right now, it is not viable economically. Many scientists and companies around the world are struggling to bring the prices down but nobody has been able to achieve that so far. In the future, prices might come down. But one cannot expect such innovations to match your schedules (hinting at the Indian government's 2030 target) because it is innovation and no one can say when the technology will finally arise.
Moreover, India is betting big on renewable energy which instead of being cost competitive, is in fact, expensive. These are the simple questions that I have with regards to adoption of electric mobility in India. We have to closely look at the reality. I understand the desire and the dream, but there needs to be a total vision of policy from electricity generation to its delivery, to manufacturing of EVs through make-in-India.
The automotive industry is a very important industry for India. The main goal should be ways to grow the industry including EVs. Simply believing that EVs will solve all the problems will not help.
Toshiba and Denso are investing in a cell manufacturing plant in India. Do you think the premise for that is strategically incorrect?
I am not saying that the EV has no future, it is an option. We have to develop EVs but the combustion engine also will not diminish for substantial years maybe until 2040. So, we have to develop both technologies and continue innovating on the ICE front such as enhancing the efficiency of engines and reduce weight of parts. If we only wait for EVs, how will we innovate in these areas? If you bet only on EVs, and if you lose the bet, you'll lose everything.
How do you see Indo-Japanese relationship evolving over the next five years?
Many Japanese companies seek the possibility to come to India but the market has been muted for the past two years. Therefore, Japanese companies are hesitating to invest all out at the moment and there’s only selective investment right now. India may not be a top priority right now but one cannot rule that out going forward. Of course, more than 100 Japanese companies are now operating in India and hence, the Indian market is not an easy market, it is a cost- conscious market as well as sees heavy competition.
For example, if two-wheeler companies like Suzuki or Honda bring lower-cost models to India, they will be in a better position to compete with domestic players. They realise that the construct of Indian market is not easy.
Japanese component makers have requested ACMA to meet with local players at the Auto Component Show 2020. Japanese companies, especially those based in ASEAN, are exploring opportunities of operating from India, potential partners in India.
Do you see fundamental IC engine component makers being impacted adversely due to the growing trend towards electric mobility?
Maruti Suzuki is a great example and battery supply is a huge growth area. We see potential of Indo-Japanese collaboration as OEMs increasingly recognise the need for localisation.
Also read: APMA’s Colin Singh Dhillon: ‘'We're showcasing Canadian capabilities and tech to support India Auto Inc in production and advanced digital manufacturing.'