TOKYO — Several major auto parts suppliers, in particular listed subsidiaries of Japan’s Toyota Motor group, have slipped new ambitions into proposals for their upcoming annual general meetings, with plans to diversify their businesses into sectors including agriculture and health care.
Diversification strategies have always been a concern for the management of parts makers in the turbulent automotive industry. The companies will meet shareholders in June to convince them that they are prepared to move beyond a sole reliance on automobiles.
Denso, a leading parts maker, is one of the companies proposing amendments to its articles of association. While already handling a diverse range of automotive-related products from engine parts to car air conditioners, the company will add agricultural businesses to its operations.
Denso began its foray into the agricultural field in March 2020. The company invested in Certhon Group, a greenhouse provider based in the Netherlands, and jointly established a sales company, Denso AgriTech Solutions. The new company aims to develop large-scale indoor agriculture facilities in Japan, and is currently conducting a demonstration of automated tomato harvesting in the west of the country.
The company utilizes its own arm-type robot, which is equipped with a camera that recognizes and cuts out only ripe red tomatoes. The harvested crops are transported by an automatic guided vehicle, just like in its auto components factory.
Denso believes that it can take advantage of its strengths, including process control and high quality requirements, as well as automation technology gained from the manufacture of auto parts, to improve the efficiency of agriculture.
Toyoda Gosei, which makes interior materials for cars, will add a wide range of new businesses to its articles of incorporation, including sporting goods, health care equipment and energy-related equipment. Among the new listed businesses, the parts maker is aiming to make use of its expertise in material handling.
Its “e-Rubber” product — a material that contracts like muscle when electric current is applied to it — is one example which has potential for use in the sports or health care field. The company has begun providing samples of the new material to Japan’s sports gear maker Mizuno for use in shoe insoles that can detect minute weight shifts associated with movement.
Among other suppliers broadening their operational portfolios, Toyota Boshoku, a vehicle seat manufacturer, will add agricultural business using biotechnology, while Tokai Rika, which handles car switches, will include the management of restaurants and childcare facilities.
Behind the drive by parts makers to diversify their earnings lies the transformation of the automotive industry: the shift to electric vehicles will greatly reduce the number of parts required, as engines and other components that require complex machining will no longer be necessary.
While manufacturers are also moving forward with the production of parts for greener vehicles, there is a strong sense of urgency among companies seeking to apply their existing technologies and expertise accumulated in the automotive parts business to other industries.
Another reason behind the series of amendments among these companies appears to be the reorganization of the Tokyo Stock Exchange. Recently, there have been many cases where companies have had to explain their future business operations to the public as a result of the market restructuring.
“In several cases, companies have decided to include such information in their articles of incorporation if they are inclined to do it as a new business,” said Seiji Sugiura, an analyst at the Tokai Tokyo Research Institute. However, “whether the new businesses will bear fruit immediately is another matter,” he added.