TOYOTATIMES

CO2 Could Impact Employment: Akio Toyoda’s Warning

TOYOTA NEWS 2021.03.22

INDEX

On March 11, 2021, on the day marking the 10th anniversary of the Great East Japan Earthquake, Akio joined a scheduled press conference of Japan Automobile Manufacturing Association (JAMA), during which he spoke about the recovery of the Tohoku region and how the automotive industry will fulfill a central role in carbon neutrality.

Public interest in decarbonization has been high in Japan since the government announced a policy at the end of last year that aims to achieve carbon neutrality by 2050. To that end, Akio has appealed to people in various ways to have a correct understanding of carbon neutrality.

According to Akio, carbon neutrality is not just a CO2 emission regulation that would impact business operations, but could be a paradigm shift that could impact employment in this country.

What does that mean? A Q&A session unravels the answers.

It isn’t as simple as "turning all cars into BEVs"

At the press conference, a reporter asked about what Akio meant by saying that he wants the automotive industry to "fulfill a central role in carbon neutrality."

In answering, Akio started explaining the importance of "correctly understanding carbon neutrality."

Akio

It would be difficult for the automotive industry to achieve carbon neutrality alone; it also requires energy to be green.

More importantly we all need to understand carbon neutrality correctly.

Some reports would have you think that all cars should be BEVs, but I would like you to understand that it is not that simple.

We make things, transport the things we make, use them, recycle and finally dispose of them. Reducing CO2 emissions to zero by 2050 through this process is the concept of carbon neutrality based on the Life Cycle Assessment (LCA).

According to the conventional way of thinking, BEVs do not emit CO2, so all we have to do is to use BEVs; however, based on the LCA, if you count the CO2 in all the processes from materials to parts and from manufacturing vehicles to disposing of them, the value will change depending on the way energy is used in a country even when making the same car.

When the government issued a carbon-neutral declaration last year, it was widely reported that "the use of BEVs will accelerate" and "sales of new gasoline-powered vehicles will cease by the mid-2030s."

However, based on the correct understanding of the LCA concept, you will notice that it is not simply a matter of turning all cars into BEVs.

Cars would no longer need to be made in Japan

Akio went on to explain the energy situation at home and abroad, which is vital for the LCA.

Here, the talk extended to employment, and he made the appeal that if the energy policy for decarbonization is not effective enough, the automotive industry, and eventually the Japanese economy, will face a crisis.

At 75%, Japan’s ratio of thermal power generation using fossil fuels is very high, and so too is the cost; in fact (as shown in the table), it is the only region where the cost of renewable energy is higher than thermal power.

In the past, as the globalization of cars progressed, carmakers sometimes shifted their production overseas to make cars "where they sell more" and "where labor costs are more competitive," but from now on, there is a possibility that there will be a shift to countries where cars can be made with lower CO2 emissions.

JAMA companies export 4.82 million units, which is about half of the domestic production of about 10 million units. In terms of LCA, it could be that this production for export will shift to countries and regions where the introduction of renewable energy is on the rise.

If Japan's introduction of renewable energy does not progress, even if Japan makes 4.82 million units for export, it will be to no avail.

Taking Toyota as an example, if you compare the Yaris made in the Tohoku region and France, the cars made in Japan may not be chosen (because of the CO2 emission volumes) even if it is the same model.

If that happens, the 15 trillion yen earned by the automotive industry through exports will be reduced to close to zero, which, in turn, will affect the employment of 700,000 to 1 million out of 5.5 million people in the automotive industry.

The automotive industry encompasses a vast range of fields, including parts, machinery and materials. Such a decline in domestic production would have a massive impact on the Japanese economy.

Fight to preserve monozukuri

As mentioned at the beginning, this day marked 10 years since the Great East Japan Earthquake. Akio looked back all that has happened in the decade since the disaster struck the Tohoku region, to examine expectations for the automotive industry.

There are 30 years until 2050. Thirty years ago, there were no hybrid electric vehicles (HEVs) or fuel cell electric vehicles (FCEVs). In the last 20 years, Japan has reduced CO2 emissions while driving by 22%, and is now one of the world's leaders in the rate of electrification.

However, as the difference between efforts to tackle carbon neutrality in Europe and Japan has become clear, it is very likely that monozukuri will face a difficult challenge in Japan.

Today is March 11. Ten years ago, I felt useless about myself, having seen that half of the Japanese archipelago was severely damaged. At the same time, it was just 10 years ago today that I commited to, "Let's make the Japanese automotive industry the driving force behind recovery and spare no efforts to preserve monozukuri in Japan."

Today, 10 years later, on the same day, the fight to preserve monozukuri is becoming even more intense in a different form, with an even greater impact on the automotive industry. I would like you all to be aware of this situation.

Over the past decade, automobiles have fulfilled a central role in the Tohoku region, and the number of people employed has increased accordingly. I think this should be extended to Japan as a whole. We would like to play a key role there, so we need to think about how to put the automobile industry in the center of energy policies and the change of the industrial structure in the future.

Ten years ago, during a time when the automotive industry was said to be a "mature industry," it was the Tohoku region who expected it to be a "growing industry."

To meet that expectation, the automotive industry has contributed to reconstruction efforts through increasing shipments and generating employment in the region.

In the aftermath of the earthquake, Japanese monozukuri struggled against an extremely severe business environment due to the super-strong yen and power shortages among other factors that came to be known as the "Six Hardships." In the face of repeated crises due to energy issues, Akio, as the head of JAMA, was determined to have the automotive industry play a central role in carbon neutrality, with which the entire nation was grappling.

This concerns everyone

Another reporter asked whether Japanese automobiles could continue to be competitive in a world moving toward decarbonization.

Akio responded by looking ahead to the country’s targets 30 years from now in 2050.

Akio

I think where something is made has become very important. If left as it is, manufacturing in Japan may become impossible.

That being the case, in order to maintain and grow, automakers that have already shifted production overseas will have no choice but to bring products made elsewhere to Japan. I believe that automakers with large production volumes in Japan will have a very hard time.

In addition to technological capabilities, where and what kind of energy can be used to make cars will be important. When you think about making a car, you might only imagine production, but even switching on a computer generates CO2.

In this regard, energy still needs to be green, so I think it will be very difficult unless we work on carbon neutrality together with other industries.

We have 30 years, but do you see that as only 30 years, or as much as 30 years? Nothing happens just like that, so I dare say it’ll be as much as 30 years.

The Japanese automotive industry has come this far since confronting the enormous damage wrought by the earthquake 10 years ago, which gives us hope for the future.

However, there have been significant changes in the outlook. I ask that you have a correct understanding of what society will actually be like in 2050.

Competitiveness is judged not only by "good quality, low price" but "cleanliness of energy." Furthermore, in order to judge what is truly "clean," we will need to broaden our perspective to include not only the production stage, but also daily activities like "turning on the computer."

You could be taking part in carbon neutrality without even knowing it. This is also the reason why Akio repeatedly insists on the importance of a correct understanding.

The path to survival for Japanese carmakers

Akio concluded with a proposal about the future of the Japanese automotive industry.

Europe and the U.S. have a market of more than 15 million units. Japan has a very small market of about 5 million units, so I believe that in order for so many carmakers to survive, they must collaborate and cooperate in certain areas while competing to deliver what the customers want.

In Europe and the U.S., there are seven major automakers for a market of over 15 million vehicles, while in Japan, there are as many as 12 automakers for a market of 5 million units, or less than one-third.

In other words, if we convert the number of units sold per company, Japan maintains a domestic production that is one-quarter the scale of Europe and the U.S.

One of the things that automakers can do to "preserve Japanese monozukuri" is develop and produce electrified cars.

Even if you try to lump all “electrified vehicles” together, there is still a wide range of BEVs, FCEVs, PHEVs (plug-in hybrid electric vehicles) and HEVs, and each company has different areas of expertise.

This means that one of Japan’s strengths is that it has a full lineup of electric vehicles.

In order for 12 automakers to survive in such a small market, collaboration and cooperation are indispensable to take advantage of Japan’s strengths even as they compete against each other.

Akio’s final remarks on this day looked ahead to monozukuri and employment in Japan 30 years from now and beyond.

RECOMMEND

Automotive Economist Ikeda Examines Toyota Results Based on Decade of Reform

Toyota closed its latest fiscal year with increased profit, even though the outlook announced in the beginning was viewed and reported as an "80 percent drop" in operating income. Automotive economic journalist Naoto Ikeda examines the results to understand what drove them.

2021.05.14 More

[Masters who support car making in Japan] #2 Kiyohide Motoki, a master of casting

Toyota Times uncovers the essence and core strength of the traditional Japanese monozukuri, which is woven from the past into the future. The second interviewee is a master of casting captivated by the casting technology.

2021.04.21 More

[Yaris named Europe’s Car of the Year] Jury president explains what pushed their choice

How did the Yaris come to win the Car of the Year 2021 in Europe? To find out what caught the eye of judges, Toyota Times spoke with the president of this year's jury, Frank Janssen.

2021.04.27 More