Bloomberg: Electric Vehicles Push Japanese Engine Parts Makers Into Crisis Mode

Bloomberg: Electric Vehicles Push Japanese Engine Parts Makers Into Crisis Mode

By Scott Doggett November 23, 2009

As Nissan and General Motors Co. prepare to introduce battery-powered cars next year, traditional auto suppliers such as Osaka-based NTN are trying to adapt by creating new lines of business, Bloomberg reports today.

Engine components account for as much as 40 percent of a typical car's total parts, so some suppliers are scrambling to come up with new products, Takeshi Miyao, a Tokyo-based analyst for car consultant Carnorama, told the news service.

While internal-combustion engines currently power more than 99 percent of cars built globally, their share can only fall as electric cars enter the market, Miyao said. That will intensify price competition and lower profits for manufacturers.

"If you're a parts maker that can't expand market share, then you can't grow without entering new businesses," he said.

Tsubakimoto Chain Co., an Osaka-based maker of chains that link engine components, also is shut out of the market for electric cars, which are powered by a lithium-ion battery and motor. About 30 percent of Tsubakimoto's $1.6 billion in sales last fiscal year were in auto parts, all of them for gasoline engines.

"It's a crisis-like situation," Toru Fujiwara, head of Tsubakimoto's auto-parts division, told Bloomberg. "With electric cars, there's no way we can apply our current technology."

Tsubakimoto is exploring making parts for battery-powered vehicles and talking with its customers, which include Nissan, Fujiwara said. The company plans to spend $40 million on research in the fiscal year ending in March.

"We have to come up with completely new technology," he said.

NTN, which makes bearings for gasoline engines, said in September it will raise as much as $270 million from selling new shares and invest the proceeds in research and development, and in affiliates. About 60 percent of its sales are in car components, the company said.

Scott Doggett:  is an AutoObserver.com Associate Editor.