Progress of Electric Vehicles and Transformation of Supply Chain in the Japanese Automobile Industry

Progress of Electric Vehicles and Transformation of Supply Chain in the Japanese Automobile Industry

Kimito Nasuno
Copyright: © 2022 |Pages: 22
DOI: 10.4018/978-1-7998-9800-9.ch003
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This chapter looks back on changes in the supply chain of the Japanese automobile industry and then examines its future. In the wake of Volkswagen's diesel fraud, the global automobile industry is moving toward abolishing internal combustion engine vehicles and switching to EVs (electric vehicles) as the environmental policies of each country join the battle for the initiative over next-generation cars. Industry members are in a hurry to gain the initiative. In EV, there is a belief that the horizontal division of labor in the supply chain will be promoted by eliminating complicated engines. Therefore, in this chapter, the author examined whether the vertical “KEIRETSU” or “KEIRETSU transaction,” a characteristic of the supply chain of the Japanese automobile industry, would be swallowed up by the wave of horizontal division of labor.
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Japanese Automobile Industry Supply Chain “Keiretsu”

The characteristics of the supply chain of the Japanese automobile industry can be expressed by the words "KEIRETSU" or "KEIRETSU transaction." In Keiretsu, an automobile manufacturer produces some of the main parts while different manufacturers make the other components to provide the needed parts and assemblies. It is a method or network of cooperative manufacturing.

According to popular wisdom, KEIRETSU was gradually formed from 1950 to 1970(Fujimoto,1995). The premise of KEIRETSU formation is that various companies tend to cooperate through division of labor based on the characteristics of the many products that machines are composed of (especially automobile parts amounting to tens of thousands). In addition, in Japan, when trying to promote industrialization after the war, individual automobile manufacturers had scant capital. So there were times when they tried to utilize conventional small and medium-sized enterprises in a cooperative endeavor along with their low-wage labor force(Chushoukigyo cho,1969). As a result, a pyramid-shaped KEIRETSU was completed, with the automobile manufacturer at the top and the primary, secondary, and tertiary parts manufacturers below it.

Key Terms in this Chapter

QR (Quick Response): This is a method to reduce excess inventory, etc., by converting the supply chain to a consumer-led pull method and quickly reflecting the response (purchasing information) from the market in inventory management, production management, and procurement management.

Case: Abbreviation for the latest trends in the automobile industry: internet connection, autonomous driving, sharing & services, and electrification.

Light Vehicle: A standard unique to Japan based on the Road Transport Vehicle Law and which refers to a vehicle with a total length of 3.4 m or less, a total width of 1.48 m or less, a total height of 2.0 m or less, and a displacement of 660cc or less. It is suitable for narrow Japanese roads, has a good fuel economy, and has tax benefits.

Keiretsu: In a narrow sense, KEIRETSU refers to the case where there is a capital relationship or personal relationship (dispatch of officers, etc.) between an automobile manufacturer and a parts manufacturer. In a broader sense, even if there is no capital or personal relationship, but a long-term business relationship is maintained, it is considered a KEIRETSU relationship. This chapter deals with the latter position.

Just-in-TIME (JIT): A method that aims to reduce costs by reducing inventory by utilizing KANBN (a card with the written type & quantity of products and enclosed in a vinyl case).

Opening up Parts Trading: This means that the delivery destinations of parts suppliers expand beyond the framework of the KEIRETSU. AU64: Reference appears to be out of alphabetical order. Please check

Ultra-Compact Mobility: A vehicle standard newly established by Japan's Ministry of Land, Infrastructure, Transport, and Tourism in 2020. The new standard specifies that the vehicles have a maximum speed of 60 km/h or less, do not exceed 2.5 m in length, 1.3 m in width, and 2 m in height, and do not operate on national expressways.

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