With the governments of China and European countries tightening restrictions on cars that run on gasoline, automobile manufacturers worldwide are making the shift to electric vehicles (EV). With the comparative simplicity of electric car technology, new companies are entering the market, possibly shaking the long-held dominance of Japanese, American and European automakers.
For the development and manufacturing of car engines that mainly use gasoline as an energy source, sophisticated technology to meticulously coordinate the movement of some 30,000 parts is needed. Major automobile manufacturers in Japan and other countries have formed cross-shareholding "vertical integration" relationships with the makers of these parts, and created a business model from development to production to sales with these companies, maintaining a monopoly in the market.
However, with the spread of electric vehicles, the possibility of that business model crumbling is growing. This is because motor-driven electric vehicles are much simpler than gasoline cars and require the assembly of less than 20,000 parts to produce each unit. As the production of motor and other parts can be outsourced, opportunities for other companies to enter the market have grown significantly.
From the 1990s, the electronics industry quickly shifted to a "horizontal division of labor," outsourcing the development and production of the main components of televisions and computers such as semiconductors and liquid crystal screens to outside companies. As a result, these products became "commodities" for general use, and because it became difficult to distinguish between the end products in terms of technology or performance, Japanese manufacturers lost out to Chinese and South Korean makers armed with cheap labor and mass production who offered the products at lower prices.
"We cannot allow for the commoditization of automobiles," said Toyota Motor Corp. President Akio Toyoda, showing an inclination toward in-house development and manufacturing of products with the use of high-performance fuel cell batteries for electric vehicles. However, in August, Nissan Motor Corp. announced plans to sell all shares in its electric vehicle fuel cell subsidiary to a Chinese investment fund, and otherwise made moves to adapt to the changes in the market.
GLM Co., a venture firm founded by Kyoto University in 2010, released 99 limited units of an electric sports car. The motor, fuel cells and other main parts were jointly developed with major manufacturers Yaskawa Electric Corp. and Omron Corp., and the manufacturing itself was all handled externally. The company is planning to release another 1,000 vehicles of two new models in 2019. Representative director and president Hiroyasu Koma said, "The trends in the automobile industry will shift just like in the electronics industry, shifting to a horizontal division of labor for manufacturing from now on."
For many years, the automobile industry has served as the driving force behind the Japanese economy. According to the Japan Automobile Manufacturers Association, there are currently some 5.3 million workers employed in the automobile-related industry, including vehicle and parts manufacturers, as well as employees of contracted companies, making up roughly 8 percent of total labor force nationwide. With the rapid growth of electric vehicle venture firms in China and new entries into the market from all over the world, if the position of established major automakers wavers, it will surely have an effect on the Japanese economy and employment situation.