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 the Japanese component manufacturers dealing with these disruptive times?
This is a very tough time for Japanese component manufacturers because we do not have competitive 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, 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.
How well is the Japanese automotive companies prepared to deal with competition, especially China?China cannot sell vehicles in the US, Europe or Japan, they can only do so in selected markets. So, first they have to sell in the ASEAN countries because that is the backyard of China. I think in the near future, the Chinese will explore the ASEAN markets and then target India. So, how to manage this threat is the question for us (Japanese companies).
So if we look only at the price, we cannot compete. We have to look at cost and quality both, otherwise we will lose some percentage of market share. But, we cannot lose all the market.
And, if India thinks that EV is the biggest target, how will they be able to stop importing two-wheelers, three-wheelers and electric buses from China? There are big electric bus companies in China which are monopolising in big cities like Schenzen right now.
The automobile industry is one that needs big investments, so the working ratio is important. The Chinese have the advantage of domestic demand and it makes sense to setup factory and then export the surplus to India. So, if India tries to transform its automotive industry it's difficult to compete with the Chinese.
So, it's not easy to be competitive and if you subsidise the Indian companies and start giving incentives to consumers and then pull it back, it's not easy to stop incentives either. Just look at the Chinese market, the people demand fell once the subsidies were taken away. So, incentives cannot be permanent solutions to promote EVs.
Japan has 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 much ability to evaluate new technologies. But, they are changing their mind and a few companies have understood that they have to change otherwise it is difficult to survive if Japanese companies are not prepared to work with start-ups and IT companies. 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, EV is 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 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.
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 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 next five years?
Many Japanese companies seek the possibility to come to India but the market has been muted for past two years so Japanese companies are hesitating to invest all out at the moment. So only selective investment right now. India may not be a top priority right now but 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 easy market, it is a cost conscious as well as sees heavy competition.
For example, if motorcycles 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 requested ACMA to meet with local players at the Auto Component show. Japanese companies, especially those based in ASEAN are exploring opportunities of operating from India, potential partners in India.
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