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Japan’s Auto Parts Makers Try to Anticipate Shift to Electric Cars

Hamamatsu, Japan — People here refer to it as “electric vehicle shock.”

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Sooner or, more likely, later the electric car could render thousands of companies superfluous here in the heart of Japan’s auto parts region.

No more engines. No call for exhaust pipes. Spark plugs? Gone with the electric-car wind.

Or so, in essence, warns a recent widely circulated study that predicts the eventual demise of much of Hamamatsu’s gasoline engine economy. Spurred by that study and a general sense of foreboding, carmakers, parts factories and local governments in this sprawling industrial town are joining forces to prepare for a future of electric vehicles.

Suzuki Motor, based in Hamamatsu, helped found a regionwide alliance in October that will help parts makers develop new automotive technologies geared toward electric cars, and even other industries.

The alliance will host a study group later this month in which engineers will dismantle an electric car motor made by Suzuki for parts makers to study.

“We are in the midst of an industrial revolution,” Osamu Suzuki, the automaker’s 80-year-old president, said on Oct. 7 at a rally to commemorate the start of the alliance.

“Our suppliers need to start studying how they can transform their businesses.”

Some experts in Japan warn that Hamamatsu is a microcosm of a wider challenge facing Japanese car manufacturing, which consists of a web of manufacturers like Toyota and Honda supported by thousands of companies that turn out engine blocks, exhaust pipes and hundreds of other parts specific to gas power.

According to a study published in August by the Shizuoka Economic Research Institute, almost 30 percent of sales in Japan’s 34.6 trillion yen ($430 billion) auto parts industry comes from parts that could be rendered obsolete by electricity-powered vehicles. In Shizuoka, the region surrounding Hamamatsu that is known for its strengths in engine technology, that number jumps to 48 percent, the institute says.

“Japan has always prided itself in developing the best engines, the best auto technology,” said Hisashi Nakajima, senior managing director at the institute and the author of the report. “If we don’t do something now, Japan’s strength could turn out to be its weakness.”

Hamamatsu is desperate to keep alive the estimated 2,000 auto parts makers in the city that makes up two-thirds of its 3 trillion yen ($37 billion) manufacturing economy and supports almost 100,000 jobs. Two other major industries in the city, textiles and musical instruments, have declined in the last decades, usurped by cheaper rivals in the rest of Asia.

Hamamatsu, locals say, now literally runs on gasoline engines. In addition to Suzuki, the city is also home to Yamaha Motor, a Japanese pioneer in internal combustion engines that has provided Toyota Motor with engines for some of its most revered models, including its 2000GT sports car, a highly prized collectors’ car from the 1960s. Yamaha continues to provide Toyota with engines for some domestic models like the Crown. The region’s auto parts suppliers had supported that effort by staying on the cutting edge of engine development. Building on that strength, these parts makers — which range from tiny factories run by a handful of employees to multinational corporations with more than 1,000 workers — supply parts to all but one of Japan’s major automakers. The exception is Mazda.

For the last 40 years, Harada Seiki has honed its precision metal-cutting technology for automobile engine parts: spark plugs, crankshafts and piston rings.

Now, Harada Seiki wants to participate in the regionwide alliance to study whether its production processes would be applicable to electric-vehicle motors.

“Electric cars will have far less of the kind of parts that we’ve always manufactured,” said Hirotoshi Harada, the parts maker’s president. “But they may require parts that never existed before,” he said. “That’s what we want to find out.”

But Mr. Harada and other executives point to challenges. For one, it is not clear how fast the shift toward electric vehicles will occur. The research company J. D. Power estimates that by 2015, hybrid gas-electric and all-electric vehicles will surpass three million units a year, or about 3.4 percent of global light-vehicle sales. But after that, adoption depends greatly on factors like government policies, the price of gas and how fast the infrastructure for batteries and recharging can be set up, analysts say.

Nor is it clear what technologies will eventually dominate — gas-electric hybrids, plug-in hybrids, pure electric vehicles or even fuel-cell cars — or whether gasoline cars will ever become obsolete. Even big auto makers seem reluctant to bet on one technology. Nissan, which will introduce what it says will be the first mass-produced all-electric vehicle next month, on Tuesday expanded its gas-electric hybrid lineup with its new Infiniti M.
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But to the extent the car industry does shift toward electric vehicles, analysts say Japan’s auto industry could face new rivals overseas, and from industries and regions beyond those traditionally associated with car making.

China has emerged as a front-runner in electric vehicles, with a flurry of small companies producing simple, cheap plug-in cars. And in Silicon Valley, the start-up Tesla has sold luxury battery-powered sports cars since 2008.

Meanwhile, auto parts makers have surrendered a central part of the electric car, batteries, to the electronics industry. Even top automakers are working with electronics companies to develop and produce the powerful and complex batteries required for electric vehicle power trains. Toyota, for example, is working with Panasonic, while General Motors is working with a unit of LG Corporation of South Korea.

“The industry map is being redrawn,” said Mr. Nakajima of the Shizuoka Economic Research Institute. “In that turmoil, winners can become losers, and losers, winners.”

Meanwhile, many parts makers here, especially smaller ones, may see their research and development capabilities or financial resources stretched too thin to develop parts for electric vehicles while also keeping up with developments in gasoline-car production.

Indeed, many small factories in Japan are already struggling to survive, weighed down by a sluggish economy and a strong yen. The Japanese currency has surged to 15-year highs in recent months, punishing manufacturers by making their products more expensive overseas.

“The question is: Where do they spend their limited resources?” said Oliver Hazimeh, director at PRTM Management Consultants, based in Waltham, Mass., and a leader of the firm’s clean transportation work. “Do they focus on something that’s going to happen 10 or 15 years out, or do they keep on developing for gasoline cars?”

He added, “They still have time, but they need to think about what is their long-term strategy.”

If history is a guide, the region’s parts makers have shown an ability to adapt to change. ASTI, another Hamamatsu-based parts maker, had its roots in making piano connector parts and wire harnesses for Yamaha pianos and organs. When Yamaha’s business shifted to engines and motorbikes in the 1970s, ASTI adapted its wire harness for automotive use.

Now ASTI says it faces its biggest challenge yet: to develop wiring and cables that will withstand the greatly increased electricity needs of an electric car. A wire harness for conventional cars carries about 12 volts, says Masashi Terada, a director in charge of technical engineering at ASTI. In purely electric vehicles, some cables would need to channel more than 10 times that, he said.

“We want to figure out what automakers are looking for as they move towards zero-emissions cars,” Mr. Terada said. “Or even better, we ourselves want to take the lead and tell automakers what they need.”

Hiroshi Tsuda, a former president at Suzuki who now leads the local alliance that will help parts makers evolve into electric vehicle suppliers, is optimistic. “By acting now, both parts makers and car makers can stay ahead of the curve,” Mr. Tsuda said. “Japanese industry has always adapted with the times,” he said. “This is not a crisis. It’s a big opportunity.”