TOYOTATIMES

CEOs on Why Toyota, Isuzu, and Hino Formed CASE Partnership

TOYOTA NEWS 2021.03.25

INDEX

On March 24, Toyota, together with Japan’s leading commercial vehicle manufacturers Isuzu and Hino, announced that the three companies have agreed to form a new partnership in commercial vehicles.

The companies intend to combine Toyota’s CASE technologies with the commercial vehicle foundations cultivated by Isuzu and Hino so that they can accelerate societal implementation and dissemination of CASE technologies and services that help address various difficulties facing the transportation industry as well as help achieve a carbon-neutral society.

But why is Toyota joining the commercial vehicle business when its main field is passenger cars? And why have the two rivals in the commercial vehicle business, Isuzu and Hino, decided to join forces?

“This partnership could not be realized if any one of the three companies were missing,” said Akio at the press conference. Toyota Times examines the remarks by the CEOs of the three companies and their responses in the Q&A session that followed.

Akio Toyoda: “Partnership based on a user’s perspective”

Akio opened the press conference by explaining the significance of the partnership, while revealing some of Toyota’s challenges in collaboration with Hino and popularizing the CASE technologies.

Akio

I would like to talk about the significance of this partnership by our three companies.

I have long been having discussions with President Shimo of Hino about strengthening collaboration within the Toyota Group.

In our same corporate group, we have Daihatsu, with whom we have in common passenger cars. So, it was easy to create synergistic effects with Daihatsu in car-making.

On the other hand, commercial vehicles are a go-it-alone business of Hino, making it difficult to find a connection with Toyota’s car-making, which is centered on passenger cars.

However, the situation has drastically changed due to the CASE revolution.

In particular, it is difficult to popularize electrified vehicles unless they are promoted together with infrastructure. The introduction of the first-generation Mirai fuel cell vehicle made me realize this.

I think that is a good example of knowing after having tried.

Instead of thinking from a manufacturer’s perspective of, “We should make this kind of car,” we came to think about things from a user’s perspective of, “What should we do so that people will use CASE technology?” This led me to see a clear direction for partnership with Hino.

What we are now being called upon to do is refine CASE technologies and disseminate them.

To achieve that, I arrived at the notion that it is important to implement such technologies through commercial vehicles in unison with infrastructure.

And there was one more thing. Viewed from a user’s perspective, shippers use both Hino and Isuzu trucks.

If Hino and Isuzu work together, we would be able to face 80 percent of Japan’s commercial vehicle customers and come to know their reality.

And if we used Toyota’s CASE technologies, we may be able to solve many of those customers’ difficulties.

Thinking so, I consulted President Katayama of Isuzu.

To build an ever-better mobility society, it is becoming more important not to only compete but to also cooperate.

This partnership could not be realized even if any one of our three companies were missing.

By utilizing the strengths of our three companies, I think we can help many of our transportation colleagues on site.

This desire to help will also be linked to our hopes for the reconstruction of Tohoku.

Since the Great East Japan Earthquake, I have visited Tohoku every year in March.

That’s because I have thought all along that what I can do is never forget about the disaster.

This year marks the 10th anniversary of the earthquake disaster, so I was wondering which site I should visit. As I was thinking about it, I was given an opportunity to visit the town of Namie in Fukushima Prefecture, which is advancing initiatives for the future.

On-site, I was able to talk with Fukushima Governor Uchibori and Namie Mayor Yoshida about their thoughts on reconstruction.

One project has advanced since then.

Isuzu and Hino fuel cell trucks are carrying goods using green hydrogen produced in the town of Namie.

And we will contribute to the realization of uniform, waste-free delivery by linking “make”, “transport”, and “use,” using connected technology.

Together with everyone in Fukushima, we will make the work of “transport” easier for people and propose new lifestyles to people on the “use” end.

We are now living in an uncharted era in which we can’t foresee the right direction.

In such an environment, you first have to try. From there you can see what’s waiting next and try again. Toyota has survived so far by doing so again and again.

This time, engaging more in the transportation front line, our three companies will work together and try it first.

We have just now stood at the starting point.

Please look forward to the efforts of our three companies as we attempt to get moving from a user’s perspective, centered on where the action is taking place.

Hino President, Shimo: “Collaboration is key to resolving transportation difficulties”

Hino President Yoshio Shimo followed Akio by explaining the difficulties facing the transportation industry in Japan, which the three companies intend to help address through this collaboration.

Hino President Shimo

I’d like to begin by saying that I feel we have made some positive steps in the current framework toward solving problems for our customers and society.

Speaking personally, I have always kept close contact with people on the front lines of overland shipping, with a strong desire to do more to solve the issues our customers confront.

That’s the same attitude I have always taken in discussing the partnership between Toyota and Hino with Toyota’s President, Mr. Toyoda.

With Mr. Katayama of Isuzu, though our companies are rivals, I have always gone beyond that position to discuss with him ways to coordinate together to solve the problems that logistics operators and drivers confront.

It is against this background that I can say today I am absolutely delighted to begin this new initiative among our three companies.

I’d like to start with a few remarks about the front lines of overland shipping.

Today there are over 60,000 logistics companies operating in Japan.

Every day these companies load, haul and deliver cargo.

It’s hard work, yet everyone involved in overland shipping takes great care with each and every package, determined to deliver it surely to each waiting recipient.

At Hino Motors, we share the perspective of our customers working at the heart of the lifeline that is overland shipping and are working hard to solve a slate of problems.

But the environment enfolding the logistics industry is unforgiving. If things continue as they are, the day may come when those packages stop being delivered.

One issue is a shortage of drivers. The reason is that nobody is willing to take the job.

Driving trucks is a tough way to earn a living. The risk of traffic accidents is ever-present, the hours are long and it involves a lot of work besides driving.

Long-haul drivers often spend as much time on work other than driving as they do on driving. Sometimes even more.

For example, loads of various shapes and sizes can take two hours or so to load. Then they may drive for five hours, wait an hour for their receiving appointment, then spend another two hours on receiving inspection and unloading.

Short-haul delivery work is no picnic either. With the explosion in e-commerce, multi-product, small-lot distribution and strictly scheduled delivery times are making burdens on drivers ever heavier.

The second issue is shipping efficiency.

In overland shipping, top priority is on delivery times and location specification. Cargo volumes vary with the season and time of day. These factors make it difficult to ship efficiently. Trucks are often empty on the return trip. The reality is that loading efficiency currently hovers below 50%.

The third issue is carbon neutrality.

Reducing CO2 emissions from overland shipping in Japan is necessary to achieve carbon-neutral operation. Just replacing old fleets of trucks with electric ones will not suffice. Unless cost-effective, user-friendly electric trucks come into widespread use, we will never meet our targets for CO2 reduction.

I mentioned shipping efficiency earlier. This is an extremely vital factor in reducing CO2 emissions from overland shipping, aiming for carbon-neutral operation.

As you can see from the points I just listed, society’s expectations of overland shipping are growing too burdensome for us to solve the problems completely.

In seeking solutions for these problems of overland shipping, there are many areas in which individual companies can and should cooperate with each other.

By coordinating with each other in a connected manner, companies can reduce waiting times and improve loading efficiency.

This partnership will also make it possible for more and more operators to adopt electric trucks.

Moreover, as these solutions make progress, we can expect work in overland shipping to become more attractive, so that the number of drivers and others involved in logistics will grow.

We are working transparently with logistics operators and others in overland shipping to transform logistics, so they can deliver the goods people want when they want them, bringing greater satisfaction to communities.

Isuzu President, Katayama: “Lead to innovation for society”

Isuzu President Masanori Katayama revealed his thoughts on how to steer the management of the company in the paradigm shift of CASE revolution. He also explained the main focus of the new partnership announced on the day.

Isuzu President Katayama


This is my sixth year as president. While various occurrences have been taking place every day, I have been constantly thinking about what a company is. My conclusion: a company is “the power to achieve innovation for society and the attitude for doing so”.

This innovation is essential for the automobile industry, which faces the huge wave of CASE, with little time left and no time to wait.

Also, achieving the government’s Green Growth Strategy is a grand challenge that can only be achieved when innovation in all industries, including the energy and manufacturing industries, is realized. It also depends on a delicate structure in which a delay in the transformation of one industry can disrupt the overall harmony.

As a commercial vehicle manufacturer, feeling that we had to fulfill the responsibility of meeting that challenge at all costs, I have continuously thought about taking every opportunity to innovate. Isuzu’s partnerships with Cummins and the Volvo Group are efforts that we have been promoting with this very idea.

While commanding management every day with such thoughts, I have had opportunities to talk with President Toyoda and President Shimo about our shared passion for customers, society, and manufacturing.

I feel that that passion provided the impetus for this partnership.

Of course, Hino is our biggest rival, and we are fighting it out with them every day all over the world. That will never change. However, at the root of our competition is a common desire to improve logistics and society.

Also, although Toyota is a passenger car manufacturer, there is no difference between passenger cars and commercial vehicles when it comes to Toyota’s desire to make society and Japan better.

Toyota is a company that has brought about a seemingly uncountable number of innovations since its inception. In terms of manufacturing, there is the Toyota Production System, and in terms of electrification, there are hybrid vehicles and fuel cell hybrid vehicles.

Hino knows commercial vehicles best. Toyota has a huge amount of technology and a powerful ability to execute, both of which have a high potential for playing a role in small commercial vehicles.

We have concluded that if our three companies work together, we will be able to innovate to overcome the rough seas of CASE and provide our customers with light-duty trucks—solutions—that are even more useful.

Next, I would like to explain the technical partnership agreed upon by our three companies.

First, I will talk about the electrification of commercial vehicles.

Becoming carbon neutral is an issue that must be addressed not only by the automobile industry but also by the entirety of Japanese industry. Many of our customers, including logistics companies, who are working to reduce CO2, have consulted us about electrified vehicles.

Reducing costs and developing infrastructure are among the many issues facing the popularization of battery electric vehicles (BEVs) and fuel cell electric vehicles (FCEVs).

However, through our new partnership, our three companies will jointly work on the battery electrification and fuel cell electrification of light-duty trucks, reducing vehicle costs, and, at the same time, we will work with society and our customers to promote BEVs and FCEVs in earnest, including through societal implementation in Fukushima Prefecture.

Another point has to do with connected technologies and services.

Increases in distribution volumes are leading to labor shortages. Redelivery and busy cargo handling are increasing driver burden. And the advance of digitalization has created new and growing transportation needs. To respond to these and other issues, we must respond to the profound transformation of industry in this age of digitalization.

The lean and efficient movement of trucks can contribute to achieving carbon neutrality. And connected technologies hold the key.

We would like to tie into the platform of Hino and Toyota, and with the participation of other partners, we will build a connected platform for commercial vehicles that will lead to solving customers’ problems, and we would like to consider providing various logistics solutions.

As others might share our aspirations for this partnership, we will always maintain an open stance.

Finally, Toyota and Isuzu have concluded a cross-shareholding capital partnership agreement. This is an example of Toyota’s ongoing “making of friends”, and I look forward to this capital relationship supporting the acceleration and success of joint technological development.

Leaders’ passion for bettering the front lines of transportation

A Q&A session followed. Akio glanced at the faces with him on the stage and introduced each member again.

“The members here represent Toyota, Isuzu, and Hino, joined by the president of the new company. But, at the same time, they are the chairman (myself) and vice chairman (President Katayama of Isuzu) of JAMA (the Japan Automobile Manufacturers Association), and the head (President Shimo of Hino) of JAMA’s special committee for large vehicles.”

It looked like a JAMA press conference, but the remarks naturally transitioned into focusing on “an automobile industry of 5.5 million people”.

As Akio mentioned in his speech, the announcement was just the starting point, and he said that specific initiatives would be “advanced from now”.

However, on the other hand, what came through in the words of the leaders at the front of the room was their enthusiasm for hearing what those on the troubled front lines of transportation had to say and to go beyond the bounds of individual companies in being useful.

――What are your thoughts on this initiative?

Akio, who responded first, used data from the transportation industry to explain the significance of collaborating.

Akio

Since last year, the automobile industry has been wanting to be a driving force for reconstruction in the fight against COVID-19. It put out a commercial stating, “We will move forward. The 5.5 million people who get cars driving.”, and it bound together five automotive industry groups.

About half of those 5.5 million people are involved in Japan’s logistics industry.

Last year, the Japanese prime minister hoisted the banner of becoming carbon neutral, and within JAMA moves were set afoot to see how the automotive industry could somehow achieve that.

Distribution by truck accounts for about 90 percent of overland logistics in Japan, and the transportation sector (including buses and taxis) involves 2.7 million people. That is about half of the 5.5 million people in Japan’s automobile industry.

In terms of the number of vehicles owned, commercial vehicles account for 20 percent of the total, but, in terms of distance traveled, 40 percent of all automobiles in Japan are commercial vehicles. In terms of carbon neutrality, Japanese commercial vehicles emit about 77 million tons of CO2 per year, or about half of all CO2 emissions from automobiles.

When the entire industry tries to take up the effort for carbon neutrality, we would get nowhere in heading for a solution unless someone in the world of commercial vehicles got involved.

As President Katayama said earlier, the reality is that the logistics industry is facing a negative spiral of high-frequency distribution, harsh work environments, labor shortages, and increased burden as the issues it faces.

With this joint project proposal, nothing would be greater if the new company, with our three companies playing a central role, could first improve the situation of this spiral.

Isuzu President Katayama followed by expressing his expectations of a partnership based on three companies with shared aspirations.

Isuzu President Katayama

I don’t think I could have thought of this partnership between our three companies under the conventional framework, but when I thought about my feelings and sense of responsibility for society, I felt that there was something very close to my own intentions.

I feel that such a new framework provides something unprecedented plus extra for solving things that conventional commercial vehicle manufacturers could not solve on their own.

I am convinced that the partnership among our three companies has the power to create innovations that commercial vehicles must achieve right now.

Services created from a user's perspective

This collaboration has just stood at the starting point. That said, from connected services point of view, the big data that can be obtained by the three companies working together will be huge.

About the possibilities for new services, President Katayama and President Shimo, who have been in charge of steering commercial vehicle businesses, responded by introducing the users’ comments.

――In the domain of connected technologies and services, this will lead to the biggest collection in the world of big data. What kind of new services will be born from “a user's perspective”?

Isuzu President Katayama

Regarding connected services and technologies, Isuzu has an Isuzu system, and because it is different from that of Hino, one customer said, “I want to have to use only one system.”

Now, because we will be trying to come up with one platform, I think that our customers will respond by saying, “Hino and Isuzu are finally doing it (together).”

Additionally, considering the applications that commercial vehicle manufacturers can provide, they’re still limited. On the other hand, if you think about content with Toyota, I think it will be magnificent.

Also, in an era in which the work of logistics companies, which are our customers, concerns how to implement digital transformation, there are complaints about it being very troublesome to have separate platforms for commercial vehicles.

As an example, the reality is that truck loading efficiency is below 50 percent. Without a doubt, connected technologies can increase this efficiency, and I think that combining the strengths of our three companies will surely enable us to keep an eye on vehicle fittings that we don’t have.

Hino President Shimo added a perspective of how to ensure safety of truck transportation.

Hino President Shimo

And there’s another thing. What logistics companies are currently having the most trouble with is safety.

For example, the use of big data by logistics for knowing such things as driving conditions, like “now is not the time to overdo it and try to drive”, to be able to deliver things safely and securely, was not possible in the past. I have expectations that such will become possible through information provided by Toyota, Hino, and Isuzu.

Hiroki Nakajima, who will lead the new company as president, added that “sweating where the action takes place” was important in this effort.

President Nakajima

One of the aims of the new company is being able to collect truck data at any time and combine it with Toyota’s passenger car data and, based on this large amount of big data, solve customers’ problems.

The important thing is how we can fuse the essence of a problem with our connected technologies (and how we can think about it) by going to a customer’s worksite and experiencing the actual trouble there ourselves.

The new company aims to sweat where the action takes place and solve problems, and I want to be able to propose solutions for each customer.

3 companies that joined hands for implementation

The last question was about the executives’ thoughts on implementation, which was a constant theme at the press conference. What is behind the strong commitment to implementation that led to two rivals joining hands? President Katayama touched on the changes of the times and answered about its value.

――How do you want to expand your efforts toward implementation? Why did two competing companies have to come together?

Isuzu President Katayama

Profound transformations such as CASE in the automobile industry and DX (digital transformation) in our customer’s industry must be overcome. By doing so with our three companies, we can accomplish that or create an apparatus that can be accepted by commercial vehicles.

When you think about conventional distribution and logistics and the relationship between commercial vehicle manufacturers and passenger car manufacturers, synergies were quite difficult.

Once in the CASE era, when DX starts in earnest, it comes down to whether there is really a wall there.

The precise objective is to create synergies, and for that reason, I think there is something tremendous in our energy for improving society.

In fact, there are already many hints like the e-Palette Toyota has developed.

Eventually, it will be mass-produced, but before that, I think that there is enormous value in societal implementation.

If that value comes out, I think that various customers will be steadily saying things like, “Can you do this too for us?”

Akio concluded the answer. As the background behind two rivals joining hands, he mentioned changes in the automobile industry, which has been striving to become a driving force for reconstruction amid major social changes in the form of the spread of COVID-19.

Akio

I think that (the joining of hands by two rivals) is due to the declaration, representing the voices of 5.5 million people, that “We will move forward."

Just around this time last year, I think there was a situation in which everything stopped due to COVID-19, we started practicing self-restraint, and lockdowns became more and more prevalent overseas.

In the case of cities, the flow of people and cars had come to a standstill. (I think people keenly felt) “Until now, goods had been flowing so much in the world.” “That not happening now is enough to make me feel down.”

Because of that, the automobile industry set a guideline and has managed to become a driving force for reconstruction.

Everyone where the action takes place, too, really did their best. Customers also favorably shopped for cars online. So I think we have somehow become a driving force for reconstruction.

Amid all of that, in terms of business collaboration, it basically remained separate respectively, in passenger cars, motorcycles, and large trucks.

However, with the shared notion of “5.5 million people” and the drive to become carbon neutral, automobile manufacturers, together with suppliers, were thinking, “Let’s do something for the society” and “Let’s think about happiness for the 5.5 million people involved in the automobile industry.”

Although it might have sounded like a naïve commitment, I think that through JAMA we were genuinely thinking about such things.

Under such circumstances, companies, with each of them sharing their strengths, are saying, "We would like the automobile industry to play a central role” even in future green energy policy.

The automobile industry, which was the driving force this time, would like to be relied on. And based on that, after thinking about industrial policy and the use of green energy, we hope to be able to keep on making suggestions.

However, even if we cooperate, rather than doing everything at the convenience of a certain company, we would like to make it possible to somehow turn the negative spiral of logistics into an “energetic spiral”.

Although we have yet to come up with any solutions, by contributing our strengths, I believe that there is something that we can do. As such, I would like to humbly ask for your support.

It was a press conference on the partnership among Toyota, Isuzu, and Hino—three companies of different nature. However, the eyes of the presidents on the stage were beyond individual companies.

“We want to help our friends in need;” “We want vehicles to be helpful for the world.” The press conference made one feel that it was a partnership of such shared aspirations.

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