When they were asked to jump-start the UK’s ailing car industry in the 1980s, Japanese car makers helped turn an industry marred by strikes and unpopular vehicles back into an export market for the UK, bringing faster and more efficient car building methods.
Toyota and Nissan still build thousands of cars in the UK, and brought some of the first hybrid and battery-powered cars to British motorists with the Prius and Leaf.
But now signs are emerging that the giant car makers are starting to struggle with the global push to electrification, particularly Toyota, which has long resisted the move.
As recently as December, executives at the company were wavering over the push to battery-powered cars, with Akio Toyoda, the company’s president and grandson of its founder Kiichiro Toyoda insisting that a “silent majority” of car companies is concerned that electric vehicles will not alone be able to end reliance on fossil fuels.
Mr Toyoda steps aside at the end of this month in favour of Koji Sato.
Mr Sato has promised to jump-start the company’s electrification after the company spent years touting its hybrid Prius as the answer to decarbonisation, together with the long-term plan of using hydrogen, a strategy not matched by rival car companies.
Meanwhile, Nissan’s problems are more financial. Yesterday, its credit rating was cut to junk status by S&P Global, which said profits will come under pressure in another tough year for the carmaker.
Yet Japan’s car makers are still large and profitable. Nissan returned to profit last year with a surplus of 385bn yen (£2.37bn) after two years of losses. Toyota made a pre-tax profit of 3.99 trillion yen and Honda booked 1.07 trillion yen.
The country is number two in global rankings in car production and it has maintained its place since 2019.
But challenges from close neighbour China and other rising electric car makers are on the horizon.
Production dipped from 8.3m in 2019 to 6.6m in 2021, a loss of 21pc, much less than major European competitor Germany’s 34pc fall in the same period.
But at the same time, Chinese production held steady at 21m from 2019 to 2021, according to the latest figures gathered by the International Organization of Motor Vehicle Manufacturers.
And no Japanese car maker is in the top-20 electric car makers, a list topped by Tesla, relative newcomer BYD, which is Chinese, and Volkswagen, according to Bloomberg data.
Nissan’s Leaf is a popular car in the UK and when it was launched more than a decade ago, the company had much of the battery-powered market to itself.
In the fuel-efficient hybrid arena, Toyota’s Prius has dominated for more than 20 years. But the carmakers have not capitalised on this lead.
In the EV market in the UK, the Leaf was the fifth-best seller, beaten by the Volkswagen ID.3, the Kia e-Niro And Teslas Model 3 and Y.
Former Nissan boss and Leaf backer Carlos Ghosn told Bloomberg in January that the company “lost its early-mover advantage” in the technology, although he made the comments after dodging an arrest warrant in Japan over financial misconduct at the car firm, charges he denies from his hideout in Lebanon.
Early efforts at rival Toyota have not run entirely smoothly. Last year in the US, Toyota launched its first mainstream battery car in the US, the BZ4X SUV. Toyota has now fixed the problem, but early buyers were told to return their cars to dealers because the wheels could fall off.
The companies must avoid the kind of malaise they were key to ending in the 1980s, when Toyota, Honda and Nissan set up factories in the UK, says Prof David Bailey, a car industry expert at Birmingham University.
“Toyota got its strategy badly wrong in terms of hybrid short term, hydrogen long term. They’re now having to reorientate pretty quickly towards pure EVs,” he said, while Nissan must reinvigorate its relationship with partner firm Renault to seize the day, he said.
Renault and Nissan formed an alliance in the wake of the French company’s rescue of its Japanese partner, with a view to sharing costs which never quite got going, says Bailey.
The pair recently renewed this arrangement, evening out the shareholdings they have in each other and promising closer cooperation.
But China looms as a challenger to the firms, with dozens of car brands eyeing Toyota, Honda and Nissan’s markets, including the UK.
Up to 30 new electric vehicle brands are eyeing up the UK car market, most of them Chinese, according to an industry report seen in January by The Telegraph.
They are particularly interested in the cheaper end of the market, preparing to sell mass market battery-powered cars to Britain. This is a field being vacated by many western incumbents as they pursue more affluent and profitable motorists.
Companies like BYD and Ora, which already have agreements in place with UK dealers, will be joined by a raft of other car makers including Chery, Dongfeng and Haval, a pattern likely to be repeated elsewhere.
While China is still making more than 21m cars a year, domestic demand is stalling and the country’s access to lithium supply and processing means it can undercut the competition.
“China is going to set the global standard in terms of making cheap electric cars. So unless the Japanese industry, US industry, the European industry adapts quickly, I think that the mass car industry risks being wiped out by the Chinese in terms of cheap electric cars,” says Bailey.
Yet the advantages Nissan, Toyota and Honda brought to European and US car buyers 40 years ago should not be forgotten, says Bailey, especially in an era where if consumers are paying more for cars – which they are – they will demand durability as well as economy.
“That big trump card I think for all of them is quality,” says Bailey.
New electric brands like Tesla and Polestar have made exciting cars to drive, but their fast development has led to teething issues.
Last year, US data company JD Power said new vehicle quality fell 11pc in 2022, led by Polestar, while Tesla was seventh from the bottom when it came to problems per 100 vehicles.
Japanese car makers have time to catch up with them, if they seize the chance, said Bailey.
Source: https://finance.yahoo.com/news/japanese-electric-car-makers-took-120000563.html