Honda, Nissan Integration Likely to Affect Auto Parts Suppliers; EV Parts Production, Standardization Key

By Daisuke Narahashi / Yomiuri Shimbun Staff Writer

2:00 JST, December 22, 2024

The business integration of Honda Motor Co. and Nissan Motor Co. will likely have a major impact on auto parts suppliers by making a reorganization among them inevitable.

To increase the benefits of integration, it is essential to improve procurement efficiency.

However, given there are nearly 30,000 companies in Japan alone that do business with Honda Motor Co., Nissan Motor Co. and Mitsubishi Motors Corp., of which Nissan is the largest shareholder, finding the optimal solution for reorganization is not easy.

Multitier system

“To be honest, I’m very worried,” a senior executive at a major Nissan-affiliated parts company said Friday after learning about the management integration talks.

On the same day, Nissan is said to have contacted business partners to explain the current situation and asked for their continued cooperation.

The Japanese automobile industry has a “keiretsu” multitiered structure, with an automaker at the top with multiple levels of closely linked parts makers under its umbrella.

According to a survey conducted by Tokyo Shoko Research Ltd. in December, the two automakers have many business partners, with Honda having 15,242 and Nissan and Mitsubishi together having 13,283. Of these, about 9,000 are manufacturing companies, and most of them are auto parts makers.

If the integration takes place, the standardization of parts will reduce manufacturing costs through mass production and benefits can be expected.

Currently, even when the two companies do use the same types of parts, they are often manufactured by different suppliers under each respective keiretsu structure. To maximize the benefits of integration, it will be inevitable to avoid a situation where the same car parts are produced by different companies.

“Many people will be forced to make sacrifices,” a senior executive of a major financial institution said.

Spread of EVs

If the spread of electric vehicles continues to progress, the streamlining of production processes is expected to accelerate further.

Gasoline-powered vehicles with their complex engines are said to be made up of as many as 30,000 parts. In contrast, the engine-less EVs are only made up of about 20,000 parts.

The focus will primarily be on reconsidering the supply network for the eAxle, a core device in electric vehicles that integrates the motor, transmission and inverter, which controls the electric power.

Honda receives its supplies from Hitachi Astemo Ltd., a major automotive parts manufacturer established in 2021 by Hitachi Ltd. and four Honda-affiliated parts manufacturers. Honda increased its share in Hitachi Astemo last year.

Meanwhile, Nissan’s main supplier is its subsidiary Jatco Ltd., which had grown by manufacturing transmissions for gasoline-powered vehicles. However, the firm is now considering strengthening the production of eAxles in anticipation of the spread of electric vehicles. Nissan also procures some parts from Hitachi Astemo.

Honda and Nissan have already announced their intention to standardize core components for electric vehicles. The question now is how the automakers differentiate Hitachi Astemo and Jatco and take advantage of their respective merits.

Honda and Nissan will probably have to provide careful explanations to avoid fear spreading among companies in their keiretsu systems, which have long been the foundation of both companies.

Ken Kobayashi, chairman of the Japan Chamber of Commerce and Industry said at a press conference on Thursday that the reorganization of the supply chain cannot be delayed any longer.

He called for a positive view of the reorganization, saying it was an opportunity for business partners to boost their competitiveness.