Japanese Carmakers Hesitantly Enter AV Market

Article By : Junko Yoshida

Honda Motor and Hino Motors are joining Monet Technologies, founded by SoftBank Corp and Toyota Motor, to develop self-driving car services in Japan

Japan’s automotive industry is freaking out… sort of.

Japanese carmakers know they’ve been late to the autonomous driving party, while waiting for a low-risk, high-return option in this fledgling market. Trouble is, that strategy isn’t working.

I’ve been surprised at the hesitancy of many Japanese carmakers to pursue autonomous vehicle (AV) development. Along with this, they’ve done little to prepare for the onset of new transportation services using self-driving cars.

I suppose you could argue that the Japanese have been wiser than Western counterparts by intentionally avoiding the AV hype. Maybe so. But my reading is that's mistaking complacency for caution. Japanese car OEMs have been sitting on the fence in AV development, despite knowing that their vehicle sales could stall in the future, as more users worldwide opt for pay-per-use services over car ownership.

Japanese carmakers’ risk-averse strategy is perplexing, because we’ve all seen before how this movie plays out. Look at Japanese CE companies such as Sony, Panasonic and Sharp.

In the late 1980s, these electronics Godzillas looked almost invincible, so much so that they started to believe their own mythology. Japanese consumer companies thought they would continue to dominate the global market simply by keeping pace with advanced technology development in cameras, videos, TVs and mobile phones (in the pre-iPhone era).

The combination of a rising tide from Taiwan, Korea and China, and the rapid proliferation of app-driven digital devices overwhelmed the Japanese giants. Both trends fundamentally altered the nature of the CE business, eventually rendering Japan’s hardware-oriented consumer electronics business obsolete in the global market.

In the global automotive context today, the rising tide is lifting Google’s Waymo and a host of startups such as Uber, Didi Chuxing and Lyft. These companies aren’t competing with Japan on the manufacturing cost of hardware. They’ve figured out they can sidestep hardware issues entirely by shifting the automotive business from building cars to selling transportation services.

SoftBank and Toyota

Against this backdrop, Honda Motor and Hino Motors announced last week that they are joining Monet Technologies, a venture founded by SoftBank Corp. and Toyota Motor, to develop self-driving car services in Japan.

Honda and truck maker Hino — in which Toyota owns a majority stake — will each invest around 250 million yen ($2.27 million) in Monet. The new investment from Honda and Hino would leave SoftBank with a 40.2 percent stake in Monet, while Toyota will hold a 39.8 percent stake.

Toyota's e-Palette shown at CES 2018 (Photo: EE Times)

The types of transportation services Monet is proposing originally come from the idea of a mobility platform called “e-Palette” that Toyota floated at the Consumer Electronics Show in 2018. Although e-Palette seemed like pie-in-the-sky at the time, Toyota predicted then – and now Monet insists – that the first and most pervasive use of self-driven vehicles would be various commercial mobile services ranging from on-demand stores, distribution and food trucks, as well as on-demand shuttle bus services and mobile emergency rooms.

Using the power of Toyota and tech conglomerate SoftBank Group’s domestic telco arm, Monet announced last week that participation in its consortium expanded to 88 Japanese companies. They include Coca-Cola Bottlers Japan, beverage maker Suntory, Yamato Holdings (a delivery company) and Yahoo Japan. Their collaboration on projects could include product delivery or product-related services.

While such an ecosystem in Japan sounds all good, I still see Monet’s plan still as mostly pie in the sky. The hard reality is that despite the massive investment and software expertise necessary to roll out such services, the demand for those mobility-as-a-service (MaaS) offerings has yet to be tested.

It’s all about data

Monet’s drivetrain — excuse the pun — is data. The more partners Monet gets, the more breadth, depth and accuracy Monet’s data will embody.

SoftBank’s connection, for example, opens the door for Monet to data gather from mobile phone users, including user location, and data on steering. Monet also aims to compile vehicle data from as many car OEMs as possible. The joint venture hopes to leverage data on braking and vehicle surroundings, which will be vital for the creation of a domestic platform to transport people and goods, along with mobile shops, restaurants and public facilities.

The investment in Monet from Honda and Hino illustrates a growing trend for tighter collaboration among competing carmakers.

Earlier this year, Daimler and BMW Group, two fierce rivals in the premium car market, announced that they are cooperating to bundle their ride hailing, short-term rental, parking and charging services into one joint venture.

For Honda, Monet is just what it needed to be a player in Japan’s MaaS business.

But Honda isn’t partnering with Toyota to develop autonomous vehicles. Honda announced last October a $2.75 billion investment and a 5.7 percent stake in General Motors’ Cruise self-driving vehicle unit. Honda explained at the time that it is tapping into Cruise to jointly develop autonomous vehicles for deployment in ride-services fleets.

Ride-sharing is illegal in Japan

Let’s not forget that Japan is one of the world's only developed markets where ride sharing remains illegal. Under Japanese law, private drivers are banned from transporting paying passengers. Facing Japan’s fragmented taxi market, operated in a strict regulatory environment, Uber is struggling to find local taxi partners to skirt the problem.

Consequently, the competition for taxi apps in Japan is being fought by Japan’s telecom companies such as NTT Docomo and SoftBank.

Last summer, NTT Docomo said it had invested 2.25 billion yen ($20.2 million) in JapanTaxi, the booking-app operator affiliated with Nihon Kotsu Group, one of the country’s largest taxi operators. JapanTaxi aspires, it is said, to be a platform that solves a range of transport problems in Japan. The app will use Docomo artificial intelligence to improve its prediction technology, as well as integrate the telecom’s smartphone payment service.

SoftBank Group also announced last fall a joint venture with Chinese ride-sharing giant Didi Chuxing to launch a taxi hailing app in Japan. SoftBank Group CEO Masayoshi Son blames the government’s ride-sharing prohibition for Japan’s failure to keep up with global front runners – the U.S. and China. Aside from Monet, SoftBank is a top shareholder in Uber, Didi and their Southeast Asian peer Grab.

Monet’s domestic focus

Although Japan’s car OEMs have been slow to plan their own MaaS services, Monet’s objective is to trigger change. SoftBank’s union with Monet has made it easier for the Japanese automotive industry to embrace the idea of building a MaaS strategy on the e-Palette platform, explained Junichi Miyakawa, chief executive of Monet and chief technology officer of SoftBank Corp.

In a one-on-one interview with Nikkei, Japan’s economic newspaper, Miyakawa made a crowd-pleasing promise: “We won’t let foreign companies take control of Japan’s MaaS market. We won’t repeat the same mistake we made when Google, Facebook and Amazon took over our Internet market.”

To that I can only say, “Good luck!” In recent years, Japan has been falling short of its aspirations to dominate markets. Monet's laser-focused approach on the domestic market might be forgiven as a prudent first step. But I don't know how the joint venture can keep Miyakawa’s bold promise without a clearer route from the outset to the global market.

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