Terrie's Take 979 - Toyota - Late to the Party and Making Up for Lost Time, e-Biz News from Japan
terrie at mailman.japaninc.com
Mon Feb 11 21:24:39 JST 2019
* * * * * * * * * TERRIE'S TAKE - BY TERRIE LLOYD * * * * * *
A weekly roundup of news & information from Terrie Lloyd, a long-term
technology and media entrepreneur living in Japan.
General Edition Monday, Feb 11, 2019, Issue No. 979
- What's New -- Toyota - Late to the Party and Making Up for Lost Time
- News -- 10-day golden week could cause financial chaos
- Travel Picks -- Farm Stays in Ishikawa, Pottery in Shizuoka
- News Credits
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+++ Toyota - Late to the Party and Making Up for Lost Time
Last week Toyota made the latest in a string of press announcements that
show how seriously the company is taking multiple threats to its current
top-3 position in the global auto market. It announced that one of its
subsidiaries had set itself the goal of developing a
"supercomputer-on-wheels" self-driving vehicle ready to demonstrate at the
Tokyo Olympics one year from now. The subsidiary company, called "Toyota
Research Institute Advanced Development" (TRI-AD), already has 500
employees and a cash pile of JPY300bn invested by Toyota itself and two
large suppliers - Aisin Seiki and Denso. TRI-AD expects to have over 1,000
employees by the end of the year.
Experimenting with autonomous cars is nothing new for Toyota - the company
has messed around with a variety of strategies for over 10 years, ever
since it became interested in Tesla in the late 2000s. However, despite
coming up with a number of experimental models revolving around the Lexus
range of sedans, the company couldn't break its addiction for its current
complex internal combustion engine business model. It also underestimated
the momentum of the market accelerating towards electrics, and some
powerful emerging car user paradigms (self-driving vehicles, car sharing,
and subscription ridership). It's been interesting to watch Toyota wrestle
with the massive changes coming through. Initially they tried to partner
with the new kid on the block, Tesla, then they tried to create a new
business model that would give them infrastructure/size leverage over their
scrappy competitors (Hydrogen electrics), but in the end they have been
forced to re-center to the obvious consumer preference for straight-forward
electrics with advanced software - as epitomized by Tesla.
And so it is that with TRI-AD and it's Highway Teammate self-driving
project, along with a battery tie-up with Panasonic in January, Toyota
appears to have realized that it either needs to be out in front or else
watch its current manufacturing advantages quickly drain away. The company
has moved fast, applying a mountain of cash to buy out or build the
components it thinks it needs to compete. Apart from the billions for
TRI-Ad, in 2018 alone Toyota also invested billions in Getaround
(co-invested with Softbank in US$300m round), Metawave (US$10m), Uber
(US$500m), Japan Taxi (co-invested with Mirai Fund for US$60m), Grab
(US$1bn), and a number of other firms.
The appeal of autonomous vehicles is easy to understand. Commercial and
delivery operators are salivating at the idea of vehicles that don't have
human drivers and which can be run 24 hours a day. All over the developed
world, the aging and thinning of the blue collar workforce is giving rise
to significant wages pressure on delivery companies and an inability to
keep up with the online shopping revolution (who will deliver those
millions of smiley face boxes at low cost?). Nowhere is this challenge more
pronounced than here in Japan. Amazon may be convenient for city dwellers,
but it's hell for e-commerce delivery companies, and this (volume and low
prices) is why Yamato "fired" Amazon as a customer a couple of years ago.
Then of course there is the appeal of car sharing, ride sharing, and ride
subscriptions - where you no longer need a car parked in the garage but
instead can dial one up. Yes, you may have to wait 30 minutes for a vacant
vehicle so it won't be as convenient as going to your garage or parking
lot, but if it costs just a fraction of having your own vehicle, and means
safer rides, AND it comes to you, this is going to be a huge game changer.
Which of course is exactly the value proposition of driverless cars being
developed by Uber and Waymo.
[Article continues below...]
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One of the interesting things to witness in the Toyota strategy evolution
is how the company is starting to realize that while traditionally they,
with tons of money and thus getting to make the rules (as in "he who has
the gold makes the rules" - Johnny Hart's "Wizard of Id"), in the brave new
world of unicorn companies, the guys with the ideas can now get funded from
other sources - such as venture capital funds like Son's US$100bn Vision
Fund, crowdfunding, or even just the reinvestment of earnings from an
entrepreneur's previous earn-out. This makes it hard for a big firm like
Toyota, used to buying its way into new technology, to stay in the game.
Probably the realization that the world of financing was changing started
after Toyota bought US$50m of Tesla stock in 2010, just as that company was
going public. In the following 5 years it struggled mightily to monetize
the relationship in the form of technology transfer, but couldn't get used
to the idea that it wasn't the boss.
In fact, after experiencing software and drive train problems with the
Toyota RAV4 in 2014, Toyota finally dumped all of its Tesla stock in 2016
(but only announced this in 2017) for a tidy sum that we estimate to be
north of US$1bn. As stock analysts in the U.S. mentioned at the time,
Toyota probably made more money from its Tesla investment than Tesla had
ever made for itself. However, now with the Model 3 turn-around, it looks
like Toyota may have made a hasty decision and Tesla is rebounding strongly
to possibly become one of next decade's market challengers.
In fact, after the news broke that Toyota had sold its Tesla stake, the
markets reacted badly and sent Toyota shares 1.92% lower by the end of the
day, contributing to a year-long decline of the stock price by an overall
13.1%. What the markets appeared to be telling Toyota was that while it may
be a big Kahuna today, all its expertise and infrastructure won't amount to
much in the future when the way we use and own autos is likely to change so
dramatically. Indeed, as Tesla and now other electric converts are
preaching, by going electric the hardware is becoming commoditized and the
barriers to entry for competitors are shrinking. Instead, the main value of
a car will be in the software and how you use the car as a multi-functional
tool. This had been Apple's lesson to IBM, Dell a decade ago, and soon
perhaps it will be Google's lesson to Apple.
Once you get past the software of operating the car, which as the
smartphone paradigm has demonstrated does eventually reach a point of
diminishing or negative investment return, you need to have a better point
of differentiation - some way in which your software has more scope and
relevance, more impact on users, than your competitors can make. Apple's
answer was a content ecosystem, that stood strong for 10 years, and is only
just now being threatened (by Netflix and Disney). For auto manufacturers,
the equivalent will be driverless vehicles and the business models that
will follow. Of course there are always going to be customers who want to
own their own car, for status or comfort, or because they live in remote
areas, or for professional needs, but for the average person if you can get
the same benefits from ordering a shared vehicle that comes to you, for a
small per-use fee, why would you invest in a car? This is the same argument
as power to the home. Most of us don't have a coal-fired power station (or
even a hydrogen one) in the basement.
Toyota definitely understands how fundamental and threatening the changes
will be, and it has done a good job of creating a massive ecosystem (Page
3) that looks a bit like "Apple for cars". You can see the presentation
http://bit.ly/2ByJznX [Toyota competitiveness presentation for investors.]
Japan is a great example of the post-automobile era will look like.
Essentially because of a stagnant economy for more than 20 years, there has
been a generation of young people who haven't had the money (initially),
then the interest (eventually), to own a car. Over the last 10 years auto
production in Japan has fallen from a peak of 9.94m in 2007 to 8.3m in
2017, a fall of 17%. Yeah, it's not a precipitous drop, but if you look at
the trends of who is getting by without using a car recently, Toyota has to
be worried about its home market. In the major cities where all the young
people have moved to, and who should be the vehicle buyers of tomorrow, car
ownership is way below the national average. As an example, in Gifu there
were 75 cars per 100 people (a rather surprising statistic) in keeping with
its position as one of the top prefectures for old men (No. 8 for male
death by old age), while in Tokyo there are just 23 per 100. Japan overall,
the rate of ownership is 48.95%, or 61.2m vehicles (stats from MLIT 2017).
So if the next generation isn't buying cars, they're not getting driver's
licences. Then if Toyota wants to stay in business it needs to quickly
develop a new business paradigm to offer private transportation as a
...The information janitors/
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- Another bedrock company caught cheating on data
- Japan getting (semi) serious about blue collar worker trafficking?
- 10-day golden week could cause financial chaos
- Itochu baring fangs in Descente tussle
- About time! Someone is introducing video interpreter kiosks
=> Another bedrock company caught cheating on data
Major real estate leasing firm Leopalace 21 has admitted that to cut costs
it has been fudging data on the fire worthiness of its apartment buildings,
and in fact as many as 1,324 buildings with more than 10,000 residents do
not meet government standards on fire safety and soundproofing. Leopalace
operates about 40,000 apartment buildings across Japan and says that
immediately it will ask 7,782 residents to move out of 641 critically
defective buildings. The company has said it will repair the buildings in
question. ***Ed: So why is it that the Japanese prosecutors think it's OK
to jail Carlos Ghosn on flimsy white collar charges when here is a company
whose cheating affects the lives of thousands? Furthermore, will there be
an investigation into past fires at Leopalace apartments, to determine if
there have already been deaths and injuries resulting from the company's
cheating? Not likely.** (Source: TT commentary from nhk.or.jp, Feb 07, 2019)
=> Japan getting (semi) serious about blue collar worker trafficking?
According to the Yomiuri newspaper, the Labor ministry plans to introduce
new rules about just who can be involved in the recruiting and dispatch of
the estimated 340,000 blue collar foreign workers expected to move to Japan
(actually many are already here, in the current "broken" trainee system)
over the next five years. Apparently recognizing the futility of trying to
control foreign organizations that are recruiting these workers, the
government is going to instead put the onus on local licensed dispatch
companies to monitor and control the ethics of their foreign partners. In
particular, the objective is to curb the practice of charging laborers
extortionate fees for a chance to work in Japan. It was revealed in a
worker survey conducted by the Justice Ministry in 2017 that about 50% of
the 2,870 trainees who absconded from their Japan contracts had paid
brokers in their home countries up to JPY1m or more for a chance to come to
Japan. They ran away so that they could take higher paying jobs and try to
pay off their debts. The Ministry said it will uncover bad actors by
randomly interviewing the workers, checking about fees and on-boarding
experiences. ***Ed: Unfortunately, as commentators have said, the problem
with these new rules is that there is no effective paper proof of charges
levied, and that is assuming that the broker can even be found. We think
that putting the onus on local players will mean that they will effectively
be forced to set up regional offices and control the recruiting process
themselves - but this may not be permitted by the laborers' home countries.
Thus, this will probably become yet another rule that has to be fudged to
make the system work.** (Source: TT commentary from the-japan-news.com, Feb
=> 10-day golden week could cause financial chaos
In recognizing the change of emperors this year, the Japanese government
has freaked out the investment markets by unilaterally declaring a 10-day
national holiday from April 27 to May 6. This will be one of the longest
stock market holidays ever among developed countries. In the USA the
longest break was a market holiday of 6 days after the 9/11 attacks. The
fear is that over the 10 days some major market moving event might occur
and Japanese financial firms and investors will be caught flatfooted as a
result. This is particularly likely for foreign exchange, where a Brexit
no-deal scenario just 3 weeks earlier or the ongoing China-US trade spat
could roil the markets and cause the Japanese yen to become a safe haven
for foreign funds. A soaring yen while everyone is out on holiday could
cause a collapse of confidence in Japanese stocks once they return and
thence cause a run on the market itself. (Source: TT commentary from
asahi.com, Jan 30, 2019)
=> Itochu baring fangs in Descente tussle
On the outside, Japan's trading companies look polite and refined, until
they aren't - which is regularly enough if you happen to have them as a
major investor. This is what the apparel firm Descente has discovered with
trading house Itochu. Apparently Itochu has tied up with another major
shareholder to try to seize control of the company. Hostile takeovers
overseas are normal enough behavior, but in Japan usually the "hostile"
part takes place behind closed doors. The tiff apparently comes about
because Itochu is fed up with Descente's timid management style. ***Ed:
While it's tempting to say that the hostile takeover is a sign of business
evolution in Japan, where shareholders start pushing companies to apply
their capital and management resources more effectively, in fact it's
probably not. Instead, it's more likely that the Itochu guys were
disrespected by the Descente ones and Itochu's move is a rather feudal
public warning both to Descente and other investees not to mess with it.
(Source: TT commentary from mainichi.jp, Feb 08, 2019)
=> About time! Someone is introducing video interpreter kiosks
Such a simple idea - we have been wondering when someone would actually
start the service. Now an unnamed Tokyo subcontractor has won a mandate to
supply department store operator Aeon with video chat interpreters so that
store staff can communicate with foreign customers. The new service, which
works on smartphones and in-store tablets, will offer 10 languages in real
time. The company is rolling the service out to 550 stores at Aeon
(supermarkets) and Aeon Style (department stores) initially, then once done
will expand to all group companies. ***Ed: Interesting to see this article
state that tourists were using an "antenna" shop service out at Narita 5-10
times a day. That is not so demanding that you couldn't support 100 stores
with more than 5-10 full-time staff, and maybe some part-time ones.**
(Source: TT commentary from asia.nikkei.com, Feb 5, 2019)
NOTE: Broken links
Some online news sources remove their articles after just a few days of
posting them, thus breaking our links -- we apologize for the inconvenience.
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No upcoming events this week.
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=> No corrections or feedback this week.
+++ TRAVEL DESTINATIONS PICKS
Old-Time Farm Life: Shunran-no-Sato, Ishikawa Pref.
Mountain village with authentic farmstay experiences
What was rural farm life like a century ago in Japan? You can experience
the answer to that yourself in the mountains near the small seaside town of
Noto, the ideal place to connect with the rich agricultural heritage here.
This place is also a base for exploration of the Noto Peninsula and its
scenic coastlines, thriving markets, and traditional crafts. There is
plenty to see and do in any season. Noto has a long history of fishing, and
the adult yellowtail caught in winter, known as kamburi, are a standout.
Other local products include soy sauce, sea salt, blueberries,
strawberries, and sake, as well as festivals of fire, motivating monsters,
and thanksgiving. And of course, the countryside is full of alluring rice
fields interspersed with forested hills and mountains, making Noto a great
destination for visitors looking to connect with Japan’s nature.
=> Mimoroyaki Workshop, Shizuoka
Enjoy pottery pieces with a unique twist
The Mimoroyaki Ceramic Workshop sits on the grounds of Okuni Shrine in
Mori, Shizuoka. The pottery artisans here create a range of beautiful
pieces, including vases, incense burners, and even pendants for jewelry
items, and each item they create boasts a special touch. The pieces at
Mimoroyaki are glazed with natural items found on the shrine grounds,
giving them a special spiritual connection.
So what exactly do these natural glazes entail? Cedar ash, cedar leaves,
and stones are all used to create different hues for pottery pieces. When
you walk around the workshop and browse the items available for purchase,
you'll see that everything on display comes in very earthy colors, and
that's nature's magic at work!
At Mimoroyaki, there are also pottery classes held every Monday if you have
an interest in learning to create pieces yourself. There are a number of
workshop time slots available, but registrations are required in advance,
so bear that in mind if you want to get your hands dirty!
Alongside the spiritual connection to nature that the pottery created here
contains, every piece is completely unique. By purchasing something from
Mimoroyaki, you're purchasing a story, and something that was made with a
person's two hands. Nothing here is mass produced.
SUBSCRIBERS: 6,071 members as of February 11, 2019 (We purge our list
+++ ABOUT US
Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)
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