The automotive industry in Japan and China – development, differences and strategies

Teddy, please tell us a little bit about yourself. What has been your career path so far and what brought you to MD ELEKTRONIK?

Yes, of course. My name is Tetsuro Ishida or Teddy for short. I live in Tokyo, Japan with my wife and our daughter.  I started my career as an engineer for laptop computers. Back then laptops were just coming onto the market. I developed many connectors for computing and robotics over 17 years before moving to the automotive sector. I have spent the last 18 years in various Engineering and Project Management roles at 3 global players in the automotive supplier industry and joined the MD ELEKTRONIK Group in 2023.

What are the key factors driving the automotive industry in China & Japan and how do they differ?

The automotive industries in China and Japan are driven by innovation, but differ in their strategic focus. China’s growth is driven by strong government support for battery electric vehicles (BEVs), making it the largest EV market in the world. The country’s investment in EV infrastructure, including charging stations and battery swapping, is further accelerating this trend. However, Japan is emphasizing Hybrid Electric Vehicles (HEVs) as a transitional technology, while also investing in hydrogen fuel cells. This approach reflects Japan’s broader strategy to diversify future mobility solutions by balancing hybrid, electric, and hydrogen technologies.

How do consumer preferences differ between Japan and China in the automotive market?

Consumer preferences in Japan and China differ significantly, reflecting the unique cultural and economic contexts of each country. In Japan, there is a strong demand for compact, efficient vehicles such as Kei cars (please see explanation below). In contrast, Chinese consumers have a growing preference for larger vehicles, particularly SUVs, which are seen as symbols of status and are practical for family use. The emerging middle class in China is increasingly opting for spacious, feature-rich SUVs that can be used for both urban and rural driving. In addition, the Chinese market is experiencing a surge in electric vehicles (EVs), driven by government incentives and a strong push towards sustainability.

Could you please explain what Kei cars are and their significance in Japan?

Certainly! Kei cars, also known as “light automobiles,” are a unique category of small, efficient vehicles that have played a significant role in Japanese automotive culture since their introduction in 1949. These cars were originally created to provide affordable transportation for post-war Japanese consumers. Kei cars are characterized by their compact size, with engine capacities limited to 660cc, making them ideal for navigating Japan’s narrow streets and crowded urban areas. Over the years, Kei cars have evolved into various models, including trucks and vans, which are particularly popular with small business owners because of their ability to carry substantial loads despite their small size. The Japanese government supports the popularity of Kei cars with tax breaks and lower insurance premiums, making them an economical choice. In addition, these cars have gained a cult following, especially among younger generations, due to their distinctive design, fuel efficiency and the cultural appeal of owning a quintessentially Japanese vehicle. The BEV with the biggest sales in Japan is the Sakura by Nissan. Sakura is a Kei car. It’s not powerful or big but it is smart and it suits consumer needs and conditions in Japan and is therefore very popular with customers in Japan.

How do Japan and China compare in the deployment of autonomous vehicles?

Japan and China are both leaders in autonomous vehicle (AV) technology, but their approaches and progress differ due to different regulatory and market conditions. China has made rapid progress in AV development, driven by strong government support, flexible regulations, and a focus on integrating AI into urban environments. This has enabled faster testing and deployment, particularly in major cities where autonomous taxi services are already being tested. In contrast, Japan’s progress has been more measured, with an emphasis on strict safety standards and data privacy. While this has slowed the pace of deployment, Japan has excelled at integrating AV technology with robotics, particularly in specialized areas such as elder care and logistics. The contrasting regulatory landscapes have shaped different paths for AV innovation in each country.

How are companies in Japan and China addressing the challenges of in-vehicle data transmission, particularly in terms of traffic safety, data security, and reliability?

Advanced data transmission technologies are the backbone of autonomous driving, enabling the vehicle’s systems to deliver the performance and reliability required. In both Japan and China, automakers are investing heavily in advanced in-vehicle networks to meet the challenges of connected vehicles. Japanese companies such as Toyota, Nissan, and Honda are working with technology giants such as Microsoft, NTT, and Renesas to develop systems, including 5G networks, that are critical for real-time vehicle communication and enhanced safety features. These partnerships also focus on ensuring data security, with an emphasis on protecting vehicles from cyber attacks and unauthorized access. In China, leading automakers such as BYD, Nio, and Xpeng are also advancing these systems, often developing solutions in-house or through strategic partnerships. Xpeng, for example, has partnered with Alibaba to integrate cloud-based technologies that enhance data processing and vehicle connectivity. While both countries prioritize data security, China’s focus is particularly on preventing data breaches that could expose sensitive information to foreign entities, reflecting broader national security concerns. Japan’s approach, on the other hand, is more focused on protecting vehicles from external cyber threats and ensuring data reliability in real-time driving scenarios.

What are the key differences in supply chain management and procurement strategies between Japan and China?

Supply chain management and sourcing strategies in Japan and China reflect the industrial philosophies and economic environments of the two countries. In China, companies often adopt a single-supplier strategy, leveraging close relationships with domestic suppliers to streamline costs and maintain control over the supply chain. This approach is consistent with China’s focus on scale, speed, and cost efficiency, which is critical to maintaining its position as a global manufacturing powerhouse. In addition, the Chinese government’s support for local suppliers reinforces this strategy, allowing companies to quickly scale production and adapt to changing market demands. In contrast, Japanese companies emphasize a multi-supplier strategy driven by a commitment to quality, risk management, and long-term partnerships. Japanese automakers such as Toyota and Honda often work with a network of suppliers to ensure redundancy and resilience in their supply chains. This approach mitigates risks such as natural disasters and supply disruptions, which is especially important given Japan’s vulnerability to earthquakes and other environmental risks. In addition, Japanese companies prioritize building trust and long-term relationships with suppliers, which contributes to high-quality production and innovation through close collaboration.

What part does the MD ELEKTRONIK Group play in the industry? Where do you see our strengths?

The automotive industry is in the midst of a digital transformation. The biggest impact from a supplier perspective is that the traditional companies are no longer the only players. They are being challenged by electronics companies with deep software expertise, such as XIAOMI from China and SONY from Japan. And these “new OEMs” are able to leverage new data transformation technologies more easily than traditional OEMs, which makes them a serious contender, especially when we see the biggest trends like EVs and automated driving. MD has been a technology partner to the automotive industry for over 30 years. We have a reputation built on trust and collaboration with both Tier1 and OEM customers. MD works not only with traditional OEMs and Tier 1 customers, but also with semiconductor companies and suppliers, thinking not just about our products, but from chip to chip. This holistic approach, combined with our global presence and forward-looking product development, makes us a strong and trusted partner for the global digital transformation of the automotive industry.

Teddy, many thanks for this interesting interview!