Challenges of the less developing region of automobile industry in Japan: A case of the Japanese Tohoku (northern-east) region as the third domestic production base of Toyota

Abstract:

Challenges of the less developing area of automobile industry in Japan: A case of the Japanese Tohoku (northern-east) region as the third domestic production base of Toyota

MURAYAMA, Takatoshi, Tohoku Gakuin University

ORIHASHI, Shinya, Tohoku Gakuin University

    This study focuses on opportunities and challenges for Tohoku region to develop an automobile industrial cluster. Tohoku is located in northern-east part of Japanese main island and consisted of following six prefectures, Aomori, Akita, Iwate, Yamagata, Miyagi and Fukushima. Kanto Auto Works Ltd., an OEM of Toyota, completed a manufacturing plant in Iwate prefecture in 1993. A purpose of the new plant was the availability of cheaper labor forces and lands relative to Kanto region. On the other hand, according to an Iwate prefecture officer (Kurosawa, 2007), since the electrical machinery as the largest sector of Iwate prefecture accounted for 35.4 percentage of whole industrial shipment in 1997, the industrial policy of the Iwate prefecture government inevitably put higher priority on promoting the electrical machinery rather than the automobile industry.

    However, Japanese electrical machinery industry gradually transferred their plants abroad, especially China and the Southeast Asian countries, to exploit cheaper labor forces in late 1990’s. Also, the destruction of dot-com bubble in 2001 accelerated Japanese electrical machinery companies to diminish Japanese domestic production. For instance, two large electrical appliance companies, Aiwa Co. Ltd. and Alps Electric Co. Ltd., shut up their Iwate manufacturing plants in 2001 and 2002 (Murayama, 2007). By contrast, the annual car production of Iwate plants of Kanto Auto Works expanded from a hundred thousand to 1.5 hundred thousand around 2000. Furthermore, Kanto Auto Works launched the second manufacturing line of the Iwate plant in 2005, so that, the production volume raised from 1.5 hundred thousand to 3 hundred thousand. As a result, Iwate prefecture government tardily initiated the project to develop the automobile industry cluster in 2003 (Murayama, 2013).

    Besides Kanto Auto Works, Toyota Motor Tohoku was established to assemble the chassis units in Miyagi prefecture in 1997, and those units were supplied to the Iwate plant of Kanto Auto Works and other Toyota’s plants situated in Hokkaido and Chukyo regions. Around 2007 Central Motor Co. Ltd., another OEM of Toyota, planned to build new plants in Miyagi prefecture that was scheduled to operate in 2011. Immediate after the Central’s new plan, several Toyota’s tire first suppliers, such as Aishin Takaoka, Toyota Boushoku, Denso and Panasonic, announced to install new plants in Miyagi and Fukushima prefectures (Orihashi, 2013). Moreover, after the Great Earthquake and Tsunami disaster hit Tohoku in 2011, Kanto Auto Works, Toyota Motor Tohoku and Central Motor were merged into Toyota Motor East Japan Inc. as a wholly-owned subsidiary of Toyota that was headquartered in Miyagi prefecture in 2012, and then Tohoku region was designated as the third domestic production base of Toyota to assemble the compact-sized cars, following to Kyushu region as the second (medium-sized car and Lexus manufacturing base) and Chukyo region as the first (new products and production methods development base). These movement of Toyota undoubtedly became a big opportunity for Tohoku to build the automobile industrial cluster.

    Nevertheless, this research attempts to address, as the shade of development, lower local procurement rate of Toyota Motor East Japan and its tier first suppliers from Tohoku local small and medium-sized enterprises (SMEs) and incompleteness of supply-chain within Tohoku region, called “delocalized industrial cluster,” and to elucidate the causes, such as the competition with powerful rivals of components suppliers in other regions, such as Chukyo and Kanto regions, and the absence of R&D function of Toyota in Tohoku, to impede the new entry of the Tohoku local SMEs into Toyota’s supply-chain.

Reference

Kurosawa. Yoshiaki(2007). Iwateken no sangyo shinkou saku; Jidousha kanren sangyo nado wo chuushin to shite (Industrial development policy in Iwate prefecture; For automobile-related indsutry), Tohoku Sangyo Keizai Kenkyusho Kiyou (The bulletin of the institute for research on the Tohoku economy), no.26, pp.25-33.

Murayama, Takatoshi(2007). Tohoku chihou niokeru koujou tettai no haikei to sonoeikyo; Iwate no denkikikai sangyo no jirei wo chuushin ni shite (The background and influence of the shutdown of manufacturing plants in Tohoku; A case of electrical machinery industry in Iwate), Tohoku Sangyo Keizai Kenkyusho Kiyou (The bulletin of the institute for research on the Tohoku economy), no.26, pp.15-24.

Murayama, Takatoshi(2013). Sangakukan renkeiniyoru jidousha sangyo shinko; Iwate no torikumi(The promotion of automobile industry based on industrial-academic-pubic cooperation; A case of Iwate), in Orihashi, Shinya, Mokudai, Takefumi and Murayama, Takatoshi(ed.), Tohoku Chihou to Jidousha Sangyo; Toyota Kokunai Daisan no Kyoten wo Megutte (Automobile industry in Tohoku; Around the third domestic manufacturing base of Toyota), Tokyo: Shouseisha.

Orihashi, Shinya(2013). Tohoku chihou ni okeru jidousha sangyo no genjou (The situation of the automobile industry in Tohoku region), in Orihashi et al.(ed.), Ibid.