Japan’s legacy automakers are jumping on the big-tech bandwagon as they race to revive waning interest among Chinese consumers.
In recent weeks, Toyota Motor said it would partner with Chinese technology giant Tencent Holdings in areas including artificial intelligence, cloud computing, big data and social media connection. Meanwhile, Nissan Motor will collaborate with Baidu on AI, including smart cockpits.
The tie-ups highlight the pressure facing foreign carmakers to win back ground they’ve lost to Chinese companies, which are able to quickly roll out tech-centric offerings that meet the needs of increasingly selective local consumers. For Japanese manufacturers, that’s meant cutting back production and staffing or, in the case of Mitsubishi Motors, pulling out of China altogether.
As a result, Japanese brands are falling further and further behind. They accounted for 15 per cent of the Chinese market in the first quarter, down from 21 per cent five years ago, according to Bloomberg News analysis of China Automotive Technology & Research Center data. Chinese domestic brands now have 53 per cent of the market, up from just 37 per cent, led by the likes of BYD to meet surging EV demand.
“The buzz these days is software-defined vehicles,” an area in which Chinese automakers are well ahead, said Bloomberg Intelligence analyst Tatsuo Yoshida. For Japanese companies, there’s “no time to lose,” he said.
Still, it’s likely to take years for the alliances to bear fruit as discerning Chinese consumers require more than just minor tweaks to existing international models to win them over.
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And not only are Japanese companies competing with Chinese automakers – which in the case of BYD can turn a concept into mass production in as little as 24 months – they’re now competing with tech firms themselves. Smartphone manufacturer Xiaomi’s SU7 comes with AI-assisted automated parking and seat-back extensions that allow for the mounting of two tablet devices. The company had received more than 88,000 orders by the end of April.
An ongoing price war, led by Tesla and BYD to try and boost Chinese EV demand as growth slows, is also a headwind.
“We’ll have to continue enduring for several years until we have more battery EVs to offer,” Toyota chief financial officer Yoichi Miyazaki said last week, referring to the price war. Chief executive officer Koji Sato said the company plans to expand AI-related investments, and this year will focus on building a strong foundation for software-defined vehicles.
Toyota is also looking to make more of its EV offerings. At April’s Beijing auto show, it showcased two new models developed with Chinese partners including its joint venture with BYD. That includes the bZ3C, a crossover battery EV targeting Gen Z consumers, and the family-oriented bZ3X electric SUV. Honda has also launched a new series, Ye, in China.
Nissan, for its part, plans to roll out eight new-energy vehicles in China, including four branded with its own marque. CEO Makoto Uchida said in March that the company wants to start exporting cars produced in China from 2025, with the aim of shipping 100,000 vehicles annually. While he didn’t say where the cars would be sent, analysts have predicted the cars may make their way to Asian countries given the challenges of getting China-made vehicles into the US and Europe.
With no signs of demand slowing for Chinese EVs, Japanese carmakers are looking to adapt their strategies to win over the world’s biggest auto market.
“We have to change our ways to compete with companies like BYD,” Nissan CEO Makoto Uchida said in March. BLOOMBERG
