Nearly eight decades ago, the forerunner of KYB Corporation latched onto the automotive sector when Japan’s defeat in World War II ended its previous business supplying hydraulic devices for military aircraft.
These days, company officials are once again looking to adapt KYB’s know-how to a new area as its main product line—conventional automotive shock absorbers that make use of its original hydraulic expertise—is under threat due to commitments by Japan and other governments to reach net zero carbon emissions.
“We seriously began to think about the EV shift four or five years ago,” Tomohiko Baba, general manager for automotive component operations, told Nikkei Asia in an interview. “We are developing our parts now while considering how we can deal with electrification.”
The stakes are high for KYB, and for Japan’s entire automotive parts industry.
Some 666,000 Japanese work in automotive parts manufacturing, more than triple the number employed by companies like Honda and Nissan in the high-profile work of building cars, according to Japan Automobile Manufacturers Association (JAMA) figures.
The automotive parts industry also accounts for a larger share of the country’s total industrial production, at 10.5% of total output by shipment value versus 6.3% for automakers, according to data from the Japan Auto Parts Industries Association (JAPIA).
The government has set 2050 as Japan’s target date for carbon neutrality while encouraging automakers to discontinue the sale of cars with conventional engines by 2035.
Ryuta Morishima, executive officer at Japan’s Battery Association for Supply Chain (BASC), said that this means the country’s automotive industry needs to put its focus now on preparing zero-emissions vehicles, given the time needed to develop new batteries and supply chains, and the potential working life of newly developed models.
“I don’t care whether sales [of EVs] are slowing down at this moment or not,” said Morishima, who was involved in the development of Toyota Motor’s pathbreaking Prius hybrid and now serves as deputy director of Prime Planet Energy & Solutions, a battery joint venture between Toyota and Panasonic. “There is no time to rest.”
BASC is trying to bring more Japanese companies into the battery business through seminars and training programs. “Companies involved in internal combustion engine components are struggling,” Morishima said.
The automotive parts sector also faces pressure because EVs typically contain as few as half as many parts as conventional cars. Japan is home to more than 20,000 automotive parts producers, according to business data service Tokyo Shoko Research. Many of these companies depend primarily on business from a single carmaker and a substantial proportion are small businesses.
Japan’s Ministry of Economy, Trade and Industry is providing support for the EV transition to automotive parts makers, too, including expert advice and subsidies, through its Mikata Project.
“There are cases of suppliers who don’t recognize their strengths and the competitiveness of their technologies,” said Juntaro Shimizu, a ministry official who previously served as director of its automotive section.
Other parts makers are too focused on the orders they have in hand to think about how to apply their know-how to EVs. “I hope that they reveal their strengths through discussions with experts,” Shimizu said.
Imports are another issue. Shipments of automotive parts into Japan have risen strongly over the past two years, more than offsetting the declines recorded over the previous four years. Last year, imports totaled JPY 3.2 trillion (USD 22.39 billion), JAPIA data shows.
Fortunately, the industry has a bit of breathing room. Industry revenues grew 12% to JPY 30.93 trillion (USD 216.4 billion) in the fiscal year ended March, JAPIA estimates. Operating profits rose 38.7% to JPY 1.56 trillion (USD 10.9 billion), giving the sector a profit margin of 5%, its highest in five years.
KYB was not so fortunate. While its revenue rose 2.7% to JPY 442.78 billion (USD 3.1 billion), operating income sank 31.1% to JPY 22.42 billion (USD 156.9 million) in its last fiscal year due to higher costs.
The company, 5.9% owned by Toyota, has been developing electronically controlled shock absorbers that give car passengers a smoother ride than traditional shocks. “With the progress of electrification and automation, the focus is switching from drivers to passengers,” KYB said in its 2023 integrated annual report. “There is emphasis on the need for having fun while traveling, and greater comfort than ever before is required.”
The company signed up German carmaker Volkswagen as a customer for its new shocks last year. Tiguan SUVs and Passat sedans equipped with the electronic shock absorbers went on sale earlier this year. KYB also now counts Chinese EV makers as clients.
In addition, KYB is working with REE Automotive, an Israeli EV truck startup that plans to use the Japanese company’s suspension technologies in its next-generation platform. REE, which recently began delivering its first vehicles, will launch a product that includes KYB’s equipment soon, Baba said.
Tire makers are also working to adapt their wares for the EV era. EVs are generally much heavier than traditional cars of similar size, and thus put more wear on their tires. In addition, since their motors are virtually silent, the noise produced by the tires as they roll down the road are a bigger factor with EVs. Companies like Sumitomo Rubber Industries and Bridgestone have been testing alternative materials and designs to create tires better suited to these cars.
Bridgestone rolled out its first tire specifically designed for EVs last year, according to its integrated report. The manufacturer is using lightweight composite materials and new rubber formulations that promise more durability and noise dampening as it focuses on specialized offerings and moves away from basic, commodity tires that its Chinese and South Korean rivals can make more cheaply.
In August, Bridgestone announced its tires would feature on the Lamborghini Temerario hybrid sportscar being launched next year. The company’s tires came installed on 31 different EV models as of last year, the integrated report said.
Sumitomo Rubber has been taking similar steps to improve tire durability. It is also focusing on wind resistance. This is a bigger issue with EVs than with conventional cars as their motors do not heat up and lose energy, with the result that energy loss from wind air resistance takes on greater significance.
Through computer simulations, Sumitomo Rubber aims to adjust the shape of its tires to reduce energy consumption. In one new model, it has narrowed the tread width in the tire’s shoulder section to even out contact pressure with the road surface.
“Advancing developments for EVs, which sometimes require tires to perform under severe conditions, may also lead to improved tire performance for [combustion] engine cars,” a Sumitomo spokesperson said.
Kyoto-based Nissin Manufacturing faces a bigger challenge. Its main product is a combustion engine component called a rocker arm. “We have been thinking about what we have to do next,” executive officer Takayuki Otsuki told Nikkei.
Nissin has partnered with Canadian startup Inmotive, which has developed lightweight powertrain technology that it says can improve the performance of EVs. Last year, Suzuki Motor bought a stake in Inmotive and is working with the Canadian company on a new EV transmission system.
“It is not a good choice to do [the EV transition] on your own,” Otsuki said. As Inmotive lacks its own factories, Nissin may ultimately take the lead in producing the new transmissions by applying its know-how in precision manufacturing.
Tatebayashi Moulding (TMC), based in Japan’s rural Gunma Prefecture, has tied its fate even more decisively to a partnership. Since 2010, it has operated as a subsidiary of BYD, the Chinese carmaker vying with Tesla to be the world’s largest manufacturer of EVs.
“If TMC hadn’t joined BYD group, the company would have been in trouble,” president Yukio Kawamura told Nikkei. “After entering BYD group, the number of employees increased by 20%, to around 120.”
TMC’s main product is steel molds used to form car body sections. Kawamura said that working with BYD influenced TMC’s production process, driving it to install new quality inspection equipment and to implement new designs more quickly.
With BYD rapidly rising up the ranks of the world’s largest carmakers, Kawamura sees a bright future for TMC. “I hope TMC expands its manufacturing scale to be able to accept more orders,” he said.