Read this in The Manila Times digital edition.
HAPPY New Year to my readers who I deeply appreciate, and I hope you had a happy and healthy holiday break, and your hopes are met this year.
Well, sooner than I thought the Japanese car industry is sending an SOS given the onslaught of Chinese car manufacturers' dominance on quality and price over electric vehicles which are also becoming more accepted globally with China's domestic automobile, the world's largest leading the way.
Based on articles I read in Bloomberg, Asia News Channel and elsewhere, the share of Japanese carmakers in China has dropped around 50 percent year on year with only Toyota remaining viable. Please note the column I wrote last year on what happened to European carmakers in China (published here on Nov. 16, 2024) year on year as well, and add what is happening as well to the sales in China of American car companies. That prior article also quoted price and performance statistics from entry to luxury level for electric vehicles and how the Chinese electric cars match or outperform on performance and easily outperform on price. The price advantage of electric cars is not just limited to purchase but for maintenance and cost of use as well. This is because paying for electricity is about 40 percent of the cost of fuel per kilometer or mile and with no internal combustion engine, there are fewer parts to maintain and replace. The main open question is the uncertain resale value of an electric car.
This rapid ascendance of the Chinese auto industry was not really rapid but is analogous to the many decades of dedication and rise of the Japanese car companies which reached maturity and equality with their Western counterparts in the 1960s and 1970s, and in some areas (like compact cars) surpassed their Western competitors.
Just like the Japanese story, the emerging Chinese auto industry story is a result of effective, long term and performance-driven industrial policy. Japan's MITI (Ministry of International Trade and Industry) and since 2001 merged into METI (Ministry of Economy, Trade and Industry) decided after World War II that their automobile industry was to be nurtured and guided to be a global player and a pre-eminent one. Same with consumer electronics — Sony, Matsushita, etc. How powerful was MITI? Here is a quote from Wikipedia: "The Ministry of International Trade and Industry (通商産業省, Tsūshō-sangyō-shō, MITI) was a ministry of the government of Japan from 1949 to 2001. The MITI was one of the most powerful government agencies in Japan and, at the height of its influence, effectively ran much of Japanese industrial policy, funding research and directing investment. In 2001, MITI was merged with other agencies during the Central Government Reform to form the newly created Ministry of Economy, Trade and Industry (METI). METI is still a major, and former Nissan CEO Carlos Ghosn sees the forthcoming merger as the work of METI to face the challenge from the Chinese on electric cars. He said that in an interview on Bloomberg.
It is widely held in the legitimate business press that this merger had serious involvement or more from METI, and it is believed Nissan and Mitsubishi Motors have fallen too far and need to merge with Honda, and with the latter being in control, at least from management. Toyota made a good bet on plug-in hybrids and is seen as strong.
About 20 years ago, China decided it wanted to initially be competitive in auto manufacturing and this was logical given their increasing wealth was on its way to becoming the biggest car market. It now has become the largest, eclipsing the US. Given their size there, that is why BYD, without being in the US and barely in Europe, could become the No. 1 seller of electric vehicles, beating Tesla, which is in China as well as the US and Europe. Then they also believed that they should become the leader in battery technology and achieved that. They saw the increased need for renewable energy and from their commanding position in making solar panels and wind turbines, this was a logical and prescient extension. As they saw electric cars being a potential solution, they then put the two together and 2024 was probably the year the electric car industry's future as a vehicle of mainstream choice became evident. What better proof than the fate of the Japanese car industry?
It seems the merger is really to preserve a globally competitive brand besides Toyota. Ghosn and others don't see much complimentary in the product lines of Nissan and Mitsubishi with Honda. I agree but that really isn't the point to me. It is to have two globally commanding Japanese auto companies. Instead of Toyota and some marginal players. Same way over a decade ago many Japanese banks merged to create globally scaled and competitive commercial banks.
Will the Japanese merger succeed? I think it has a good chance; it becomes in effect a bigger Honda as they are really the respected Japanese global brand besides Toyota. But what do I think is happening with China? Their auto industry has arrived. Thanks to enlightened industrial policy and a very wise bet on battery technology and electric cars. They made a big bet on the future rather than the status quo over a decade ago. There are now four centers of auto giants and leaders — the US, Europe, Japan and now China.
P.S. For those with access to The New York Times, you may want to read "How Shen Yun Tapped Religious Fervor to Make $266 Million," published on Dec. 30, with another story in The Epoch Times and Falun Gong the next day. It is about how the right wing and virulently anti-Chinese government Falun Gong abused its members and engaged in illegal activity, including money laundering from the dance group Shen Yun. Until it was banned from most mainstream internet servers, the unhinged propaganda paper Epoch Times was what Yen Makabenta was very fond of quoting as one of his sources. Though I have not read any of his columns for over a year, he even previously stopped quoting them as they were thrown off most web hosting sites for fraud and disinformation.