Japan, Toyota, Honda, Nissan face 7 big challenges in EV age

TOKYO — U.S. and European carmakers once feared Japanese rivals would conquer the world.

Now, Japanese players are the ones shifting into crisis mode as they confront cutting-edge technologies and cutthroat competition from China, Silicon Valley and beyond.

To get their mojo back, Japanese automakers have identified seven key challenges they must overcome.

The powerful industry lobby here, the Japan Automobile Manufacturers Association, is recommending a 2024 plan of action for its members, which include the big names: Toyota, Honda, Nissan, Mazda, Subaru and Mitsubishi. It also plans to make policy proposals it wants Japan's government to act upon in June, when the cabinet office usually takes up new initiatives.

JAMA devised the strategy under the watch of its former chairman, Akio Toyoda, just before the Toyota boss handed the wheel to Masanori Katayama, CEO of Isuzu Motors.

Katayama, who took over as JAMA chairman Jan. 1, must now implement the plan.

For Japan, the auto sector's survival is paramount. The industry is the pillar of the country's economy. It is linked to the employment of some 5.5 million people — and 8.5 million if commercial trucks, motorcycles and the transportation sector are thrown into the mix.

"The challenges we face are many and varied, spanning from advances in automotive technologies to environmental impacts and market volatility," Katayama warned in November, after he was tapped to be Toyoda's successor. "Organizing these into seven focus areas for the next several years, we found many issues require coordinated efforts."

Auto leaders here often talk about competition vs. collaboration. When it comes to tomorrow's challenges, they see a need to cooperate like never before.

Here's a look at their top priorities and how Japan aims to reclaim its automotive edge.

This year, new labor regulations restrict the work hours of truck drivers. Combined with an overall labor shortage, this pinches Japan's finely tuned just-in-time production system. Automakers are looking to alleviate the shortage and introduce mobility businesses that might keep the factories running like clockwork. The focus will be on electrification, software-defined vehicles and better energy management.

Despite government initiatives, the infrastructure for charging electric vehicles and fueling hydrogen-powered ones is still in its infancy. JAMA wants to promote a multipath approach to building out networks. The goal is to promote not only EV stations but hydrogen stops for fuel cell vehicles and even hydrogen combustion vehicles. The key will be tailoring the infrastructure to regional needs and vehicle types.

Japan has one big-name EV battery maker in Panasonic and a big chipmaker in Renesas. But the rise of top-notch Chinese and South Korean battery giants has put much of this critical technology and supply in foreign hands. Further, the global semiconductor shortage exposed the local reliance on chips from makers in Taiwan. JAMA wants to double down on domestically sourced supply chains for these essential components, especially next-generation batteries.

Japan is poor in most natural resources, especially those critical to next-generation mobility, such as rare-earth minerals and lithium. The seismically active archipelago is also susceptible to major supply chain disruption, as seen during the 2011 earthquake-tsunami disaster. Meanwhile, intricate and indispensable shipping and air links connect the trade-dependent country to the rest of the world. JAMA wants to shore up supply chains in the face of these risks.

International trade is Japan's economic lifeline. In 2022, the latest year for which data is available, the country exported some 3.8 million cars, trucks and buses — almost half of all the vehicles it produced. To keep that juggernaut humming, Japan needs free-trade agreements, access to foreign markets and ramped-up investment in technologies to keep its automakers competitive. The industry wants to court foreign investors in advanced fields such as software, new materials, batteries and microchips.

Efforts to go carbon neutral will only be successful if the industry's energy is clean. That means finding eco-friendly fuel to power vehicles and the factories that make them. Japan must pivot to renewable resources such as wind and water. And it must tap new ideas such as ammonia-fired thermal power plants, industrial scale hydrogen electrolysis and carbon dioxide recirculation.

In today's industry, information is power. But the information is only as good as the data sample size and the ability to process it. Japan's auto sector sees big potential in pooling its huge dataset from cars with sets from other industries. One focus of the sharing will be better tracking of parts. Doing so, the automakers say, will make their supply chains more resilient. Cross-industry collaboration will also jump-start the shift to software-defined vehicles and unlock new revenue streams.