Hitachi, Honda suppliers to merge parts business

Hitachi Ltd will merge its vehicle components unit with Honda’s three suppliers in a bid to cut development costs and better respond to a rapid industry shift to electric vehicles (EV) and self-driving. The deal to create Japan’s third-biggest auto-parts supplier by sales also marks intensifying consolidation in the country’s auto industry, as it struggles to adapt to technological change.

Honda’s bigger rival Toyota Motor Corp announced last month it would raise its stake in Subaru Corp to more than 20pc. Toyota has also been cementing ties with smaller rivals such as Suzuki Motor Corp and Mazda Motor Corp, which have acknowledged that they lack the investment firepower to invest in developing new vehicle technologies.

The merged company announced on Wednesday aims to focus on developing components for EV and self-driving systems, along with new, on-demand mobility services, combining their scale in a bid to come up with products more quickly and efficiently. Hitachi said that increasing complexity of vehicle technologies required bigger R&D firepower, a bigger global footprint and access to a bigger pool of talent.

“The merged company will be a mega supplier and will deliver competitive advanced technologies and solutions,” Hitachi Executive Vice President Keiji Kojima told reporters. “We will leverage our strengths and our scale to expand globally.” Hitachi, will take a 66.6% stake in the newly formed company by merging its component unit with three Honda affiliates - Keihin Corp, Showa Corp and Nissin Kogyo Co, while Honda takes the remaining stake.

The merger is expected to be completed in about a year. Hitachi, which makes everything from television sets to elevators to trains, said that its majority stake in the merged company would make it easier to attract new customers. Traditionally, Japanese automakers have deep ties to their group suppliers, sharing technology and talent.