Daily Management Review

Hitachi Planning A Merger With Honda Suppliers In A Bid For EV Technologies


Honda and Hitachi to come together to create “a mega supplier” for delivering “competitive advanced technologies and solutions”.

Source: commons.wikimedia.org; (CC BY-SA 4.0)
Source: commons.wikimedia.org; (CC BY-SA 4.0)
Hitachi Ltd has plans of merging its “vehicle components” arm with three of Honda’s suppliers in an attempt to reduce cost of developing EV markets while receiving better response towards the “rapid industry shift”.
The above mentioned deal underlines Japan’s auto industry’s intense surge seen in consolidation as the industry seems to be struggling amid the changing tech scenario. Last month, Toyota Motor Corp, the “biggest rival” of Honda, revealed that it was going increase its Subaru Corp’s stake to over twenty percent.
On the other hand, Toyota has been strengthening its connections with smaller rivals like Suzuki Motor Corp as well as Mazda Motor Corp, while the latter has agreed upon its lack of “investment firepower” needed to “invest in developing new vehicle technologies”.
The result of the newly announced merger will devote itself in creating EV as well as “self-driving systems” based components besides it will also cater to “on-demand mobility services” which will bring together “their scale” and produce “more quickly and efficiently”.
Given the growth of complexity in vehicle technologies, Hitachi noted that one requires “bigger R&D firepower, a bigger global footprint and access to a bigger pool of talent”. The executive vice-president at Hitachi, Keiji Kojima said:
“The merged company will be a mega supplier and will deliver competitive advanced technologies and solutions. We will leverage our strengths and our scale to expand globally.”
The newly announced merger is likely to be completed within a span of a year wherein, Hitachi will claim “a 66.6% stake”; the rest will be with Honda. The three affiliated units of Honda involved in this merger are Keihin Corp, Showa Corp along with Nissin Kogyo Co.
Hitachi thinks owning “majority stakes” in the new merger will be good for the company to “attract new customers”. One the other hand, following the merger, Honda will have less control over its “long-time suppliers”, although it is likely to gain “better access to technology” for Hitachi’s automotive units alone brings in an annual revenue of “971 billion” while the combined figures of “Showa and Keihin’s” is only “636 billion yen”.
For the moment, the merged unit will be called “Hitachi Automotive Systems” which is set to produce “a wide range of components from electric power steering systems, millimetre-wave radar used in self-driving cars, and EV invertors”.
Showa’s expertise comes in “shock absorbers and steering systems”, Keihin is good with “engine parts” while Nissin will contribute in manufacturing “brake systems”. Moreover, Hitachi executives are aware that some of the company’s products are going to “overlap with those of its new partners”. According to a Senior Research Analyst, “brokerage CLSA”, Chris Richter:
“All of Honda’s suppliers have been relatively small entities ... Now it can have a stake in a major auto parts supplier”.
“Whatever control they are losing over Keihin for example, is not a big loss compared with what they’re going to gain.”
Honda faced difficulties in maintaining the tempo of “its automobile operations” while profits have reduced below fifty percent over the span of last two years as a result of “a series of quality-related issues” thus putting on a financial constrain in investing in “new vehicle technologies”. The “proposed deal” is likely to strengthen the relation of both the automakers.