EV Realignment Accelerates in Japan, Europe and U.S. Approach Cheaper Chinese Manufacturers
The shift towards electric vehicles (EV) is a movement that paves the way for realignments that transcend national borders and industries, such as in the form of Japanese and American automobile manufacturers creating partnerships. The shift is not only contained to these countries, as in Europe, there have been examples of newly emerging EV-specializing companies forming alliances with traditional automobile companies, or creating partnerships with Chinese EV makers.
Japan-China Partnership on Compact EV Vehicles
A partnership that transcends company groups was announced on July 21 this summer in Japan, with Toyota, Suzuki, and Daihatsu announcing a joint business for the manufacture of commercial compact EV vehicles. A partnership among these companies will be the first of its kind in the nation.
In Japan, the pioneer for manufacturing commercial compact EVs is a relatively new company known by the name of ASF. Founded in 2020 by current president Hiroyasu Iizuka, formerly an executive at Yamada Denki, ASF is described as Japan’s first fabless EV manufacturer, and could be said to be the first to form a Japan-China partnership for EVs as well.
ASF plans to handle the designing and planning of the commercial compact EVs, while Wuling Automobile Industry (under Guangxi Automobile Group) is slated to handle the manufacturing. With an order for 7,000 units already placed from transportation company Sagawa Express, the project can expect high demand from various other major companies as well. It is thought that the partnership between Toyota, Suzuki, and Daihatsu was formed out of concern for lagging behind these kinds of newer, smaller manufacturers.
Not just in Japan, but even on a global scale, cooperation and partnerships between major manufacturers over such EVs are being formed at unprecedented speeds. It can be suggested that this is a move made by large companies to pre-emptively take hold and keep newer fabless EV companies from entering mainstream competition, and maintaining automobile manufacturing within their grip.
One reason for the concern is due to EV manufacturing having a lower barrier to entry compared to gasoline-powered vehicles, which require significantly more parts and resources to make. As a result, it is much easier for new start-up ventures to enter the industry.
On the other hand, due to them being powered by a combination of batteries and motors, the chassis of an EV is easily scalable. Simply by changing the size of the chassis and amount or strength of the batteries and motors, the same base foundation can be used to support a wide range of EV sizes. As such, the primary difference that sets apart EVs from one another will be from the body mounted on the base, as well as the software installed in the car system. That is why Toyota is making claims they plan to shift into a software company rather than a hardware company.
This means that even for existing and established automobile manufacturers, they can enter the EV manufacturing industry in a cost-effective manner by utilizing automobile platforms that were jointly developed, and building on top of them.
Manufacture subcontracts for fabless EVs production also include companies with no former experience in the auto business, as well as existing Tier 1 (primary subcontractors that supply directly to automakers) companies. As major automakers and independent fabless manufacturing start-ups compete, it seems it will be necessary to form partnerships with other companies in order to maintain an advantage in the EV era.
Ford and Volkswagen Join Hands
The largest EV alliance from a global perspective is likely to be the partnership between the United States’s Ford Motors and Germany’s Volkswagen (VW). The two automobile giants announced an EV partnership in 2019 and have since announced a follow-up expansion as of last year. The joint partnership focuses on these following four primary points:
1. Ford and VW will collaborate on commercial vehicles – city van created and built by Volkswagen Commercial Vehicles and later 1-ton cargo van engineered by Ford, plus Volkswagen medium pickup built on Ford Ranger platform – from 2022
2. During the lifecycles of the products, the companies expect to produce up to a combined 8 million of the three commercial vehicles included in the commercial relationship
3. Ford to build new electric vehicle for Europe based on VW’s Modular Electric Drive toolkit beginning in 2023; could approach a multiyear 600,000-plus units
4. With VW’s investment in Argo AI, Ford and Volkswagen will work with Argo AI to independently develop autonomous vehicles (AVs) at scale based on Argo AI’s innovative self-driving technology
By sharing the medium-sized vehicle platforms made by VW, as well as the large-sized vehicle platforms made by Ford, the partnership will be able to cut down massively on costs in developing bases and parts as a whole. Furthermore, by sharing its EV platform with Ford Europe, VW is expected to be able to earn up to 20 billion (USD) in revenue.
Similar large-scale partnerships have also taken place at American company, General Motors (GM). In recent news, Honda and GM have also announced a partnership as well, with Honda to develop a new EV using GM’s vehicle platforms. GM has also formed a partnership with South Korea’s LG Energy Solutions to establish a battery manufacturing factory in the United States, as well as plans to create its own smart platform.
Simultaneously, GM is actively investing in other American companies such as the emerging EV pick-up truck manufacturer Lordstown, as well as another emerging new automobile manufacturer Nikola, which has previously received some attention for its manufacturing of hydrogen-powered trucks.
On the autonomous vehicle front, GM Cruise Holdings has acquired a Californian company that works in the development of autonomous driving systems. SoftBank Vision Fund and Honda have also invested in this same company.
Moves by Japanese and Korean Automakers Remain to Be Seen
On the other hand, Toyota has also announced a partnership with BYD of China, beginning development of EV sedans and SUVs. The alliance with BYD also brings an advantage for Toyota by securing resources for batteries, which are a major component for EVs.
Boasting some of the most advanced EV development as well as being one of the largest producers globally, China naturally has many joint ventures and partnerships with various manufacturers. One such example is GM’s investment in Wuling Automobile, which has manufactured the Wuling Hongguang, an ultra-compact EV selling for 450,000 JPY. Another is Renault’s 50% stake in JMEV, the new EV subdivision of Jiangling Motors. As the popularity of EVs increase, so too will we likely see an increase in Chinese cars across the world.
The EV industry has brought forth partnerships of the like that were previously unheard of until now. One such development involves the Croatian automobile manufacturer Rimac, known best in Japan as the rival to the EV supercar “OWL” manufactured by the human resources company Aspark located in Osaka. The small start-up initially established by then 21-year-old Mate Rimac merely ten years ago has since merged with the iconic, high-end automaker company Bugatti Automobiles, establishing the new joint venture Rimac Bugatti LLC.
The German luxury car manufacturer Porsche of the VW Group had invested into Rimac, and with that push, the company was able to absorb Bugatti in a result that surprised automakers internationally.
It is likely that similar large-scale mergers and acquisitions will continue and can potentially occur anywhere in the world. Automakers in the States and Europe are particularly enthusiastic about forming an alliance that involves Chinese makers, potentially with China at its epicenter and prime mover of the industry.
Though it’s yet to be seen, it will be interesting to see if Japanese and Korean makers will also get swept up in this shift, or compete with alliances of their own.
(Sachiko Hijikata, journalist)