Major changes could transform Japan’s automotive business in a major way over the next five years.
According to a report from Kelly Blue Book, tectonic changes could rock the world’s largest vehicle producer right to its foundation. Consolidation could reduce the country’s eight brands down to just three or four by 2021. As crazy as this may sound, there are several good reason why it could happen and cost is one of the biggest.
Designing, engineering and building vehicles is incredibly expensive, especially as they become ever more tech-laden. For instance, the amount of money spent on research and development to bring autonomous car to market is unfathomable. If all competitors are rushing to introduce this technology they’re all expending a ton of capital that could be spent elsewhere if they weren’t duplicating work. In short, consolidation could lead to much greater efficiency.
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Beyond all of this, the cost of meeting ever-changing government regulations around the world are nothing to scoff at, either. A strong Yen and slowing sales in China are issues compounding issues for these companies.
Aside from rising costs, Japan’s auto industry has received something of a black eye in recent years. Profits at Toyota, the world’s largest car company, have slowed, Mitsubishi has been caught fudging fuel-economy figures and then there’s the devastating Takata airbag recall.
Curiously, we’re already starting to see consolidation in the Japanese auto industry. Nissan just announced a tie-up with Mitsubishi, with the former company buying a third of the latter’s stock. This deal could cost Nissan around $1.9 billion but it’s likely there are even greater monetary savings to be reaped.
[Source: CNBC]
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