Japan tries to keep its spluttering car industry on the road

Toyota – which has been a laggard in the development of electric cars – made a statement at last year’s Tokyo motor show with boss Akio Toyoda telling the world that the company was becoming a “mobility business”, not a carmaker. It has the cash to back such a pledge, something that many of its rivals – both domestic and foreign – may not.

The global car industry is facing a revolution. Self-driving cars, mobility services such as ride sharing and the move to electric – and potentially hydrogen – power mean that the days of personal ownership of vehicles with traditional internal combustion engines are almost certainly numbered.

The challenge for Japan’s automotive companies is what to do with their numerous factories making vehicles whose time may soon be up. 

There’s no better warning than comparing Toyota with Tesla. The former makes 11m cars annually and is profitable (just), while Elon Musk’s company has made just over one million cars since being founded in 2003 and has only the vaguest familiarity with profit. Despite this Toyota is valued about $215bn, while Tesla is not far off double at $391bn. 

The market is pricing in the disruption that is coming to the sector and the cost of transforming legacy businesses into something fit for the future.

While Toyota looks unlikely to be a target for foreign buyers, Japan’s smaller and more troubled automotive manufacturers could get snapped up by cash-rich companies from China – the world’s largest car market with annual sales of more than 20m vehicles.

Backed by Beijing – whether directly or in less eveident ways – they’d be happy to get their hands on Japanese institutional knowledge that could bring China’s own engineering and manufacturing standards up to a level where they not only matched, but potentially exceeded, much of the rest of the world.

It’s already happening elsewhere but on a smaller scale. Chinese conglomerate Geely has snapped up Volvo and Lotus, both of which are thriving under the new ownership, while Shanghai Automotive Industry Corporation acquired MG and works with VW and Chevrolet to build cars for its home market.

Perhaps the biggest danger for Japan’s much-admired car industry is that focusing attention on resolving its internal troubles means it stops innovating and becomes vulnerable.