South Africa must rev up its motor manufacturing engine or miss the bus

Technology is shaping the future of mobility, from electric vehicles to autonomous cars and e-hailing services, which eliminate the need for a car completely. A visit to leading car and motorcycle manufacturers in China and Japan reveals a century of crisis, learning, adaptation and reinvention.

The entrance to the Toyota Commemorative Museum of Industry and Technology in Nagoya, Japan, has a large circular loom in the entrance. The mammoth machine was invented by Sakichi Toyoda, whose fortune seeded the Toyota empire. His Type G loom was sold to Platt Bros & Co Ltd Oldham in 1929 for £100,000. Not only did the Type G permit non-stop shuttle changing, but its system automatically shut down the loom if a warp thread snapped.

Mr Toyoda’s Type G Loom. The sale of this loom to Platt Bros. of England made it possible for Mr Toyoda’s son, Kiichiro, to diversify into cars.

With a contrasting combination of innovation and pragmatism, it is no wonder than Japan became the world’s largest car producer (until 2008 when overtaken by China), that Toyota is the world’s second-largest carmaker, or Honda the world’s largest motorcycle manufacturer.

Not forgetting their roots, however, half the Toyota museum is dedicated to the evolution of Japan’s cotton industry, and Toyoda’s role in it. Still, today, Toyota industries produces hi-tech looms. The difference is that it is less than 1% of its business for a company which produced 8.8 million vehicles in 2018.

The Rotary-engined RX2 was a big seller in South Africa and cemented Mazda’s international brand.

Unusually, however, Mazda has accommodated foreign partners not only in technology sharing but also management based on its long-term tie-up with Ford. It wasn’t afraid to abandon the rotary engine in 2012 when it could not get the emissions and economy standards to contemporary expectations. Yet today it is pushing, once more, the technological envelope with its production techniques and its Skyactiv engine systems. Operating at the peak, the Hiroshima plant assembles a car every 30 seconds.

It’s a business not without its twists and turns.

The coastal city of Hamamatsu, 260km west of Tokyo, is the motorcycling equivalent of Silicon Valley, the birthplace of Yamaha, Suzuki and Honda.

Michio Suzuki founded the Suzuki Loom Works in Hamamatsu in 1909. His business took off with the invention and export of a new automated weaver 20 years later. Intent on diversifying, Suzuki started a small car project in 1937, the same time as Honda set up his piston ring manufacturing operation in a small garage. Suzuki’s motoring plans were halted by the war, after which the company returned to producing looms. Faced with the collapse of the cotton market in the early 1950s, Suzuki restarted his transport project, building, like Honda did at its start, a “clip-on” small engine to power bicycles in 1954 in meeting a dearth of post-war motorised transport.

Michio Suzuki overlooks the first ‘clip-on’ motorcycle at the Suzuki Headquarters in Hamamatsu, Japan.

But it lost its way because it failed to move with the times.

While Japan ascended, led by the likes of Honda, Yamaha (today the world’s second-largest motorcycle producer), Kawasaki and Suzuki, the British motorcycle industry went into terminal decline. A 1975 UK parliamentary study found that Japanese workers weren’t paid less than their British counterparts, but rather that the manufacturing techniques simply were more capital intensive, resulting in increased productivity and better quality.

The story of British decline is thus not one of poor worker skill or inflexibility, but rather one of rigid thinking and unwillingness to adapt like Suzuki, Honda and other Japanese manufacturers.

And the third reason is down to the company’s continued willingness to introduce new technology, just as Michio Suzuki did with his looms. Today Suzuki spends $1.5-billion annually – or nearly 3% of turnover – on research and development, a large share of which is earmarked for electric vehicle technology.

David Powels, First VP of SAIC-Volkswagen, previously headed Volkswagen’s operations in South Africa and Brazil. SVW’s China operations are among the most productive of all of VW’s 120 plants worldwide.

China is the world’s largest car market, with upwards of 23 million vehicles sold annually. SVW is the largest supplier, with just under a 10% share.

The days of the internal combustion engine are numbered, with countries from France to India looking to phase out or completely ban petrol- and diesel-guzzling cars between 2030 and 2040. So far, declining numbers of car sales in America, the UK and Europe, South Africa’s main export markets, have been offset only by sales in China and India. But this won’t continue forever. The relatively slow adoption of electric vehicles so far is no indication of the future either, and many predict a “tech break” or tipping point soon, as with PCs and mobile phones.

Another driver of change is the sharing economy. With traditional cars only being used for 4% of their “life”, the combination of autonomous vehicles and ridesharing technology brings large gains in terms of efficiency and costs.

Failure to acknowledge the disruptive power of technology can be catastrophic. It has ended once blue-chip companies such as Kodak, Nokia and Yahoo. The automotive industry could be next.

Where might this leave South Africa, which has bet on subsidising large car manufacturing operations with billions of rands every year?

It is time for the South African auto industry to shift gear and position itself as a manufacturing industry for the future, not for a dying past. The change must be gradual, starting with incentive packages that reward innovation and adaptation, not just the importing of foreign tech. This is the lesson from Volkswagen in China.

Lessons, from Toyota’s Commemorative Museum in Nagoya to South Africa.