TOKYO -- Keihin, a Honda Motor-affiliated parts maker, is betting its future on power control systems. The world is shifting quickly to electric vehicles, and Keihin's mainstay fuel supply systems alone can no longer guarantee a future for the company.
For nearly 20 years, Keihin has been supplying parts for Honda's hybrid vehicles. Now, the company applied the technology to develop a new base system for electric vehicles. With it, Keihin hopes to challenge the Chinese market, where electric vehicles are becoming increasingly popular.
"The race is now on for the power control system business," Keihin President Chitoshi Yokota said. "If [we] fail to win deals with automakers in the next year or two, we never will," he added, expressing a sense of urgency.
Since 1957, when Keihin started supplying carburetors for Honda's Dream motorcycle, the company has been mostly selling fuel systems such as its mainstay fuel injectors.
But the global shift to electric vehicles could force Keihin to rethink its business model. And the change of direction was apparent at the recent Tokyo Motor Show.
Keihin exhibited its "E drive system," a package of electronic parts used in hybrid vehicles to control power systems. At the heart of the new system is a power control unit, which controls power supplies to and from the battery and motor. The unit boosts electricity supplied by the battery to power the motor. It also transforms electricity generated by the motor, which can be used to charge the battery.
The PCU can also serve as a main component in plug-in hybrids and electric vehicles. Optimizing power use will allow for a longer driving range. The PCU's power density is among the highest in the industry, Yokota noted, meaning it is small but has ample power.
Keihin is making long-term investments rather than focusing on short-term profit. Last year, it began mass producing the new system. In June this year, it invested several billion yen (over $10 million) to double production capacity at its plant in Miyagi Prefecture to 100,000 units per year. The company also set aside 23.1 billion yen ($203 million) for research and development in the current fiscal year through March, up 20% on the previous year.
Keihin has its sights set on Chinese automakers. China is already the world's largest market for electric vehicles. And the Chinese government is set to start obliging, from 2019, automakers in China to produce certain amounts of electric vehicles in China.
Given expectations that China's electric vehicle market will grow significantly, Keihin has been sending engineers to China almost every week to propose ideas, Yokota said.
"There are many competitors but [Keihin] has a technological edge over others," Tomoya Abe, a Keihin director who is responsible for research and development, said. Abe underscored his confidence in the company's technology to power vehicles that it has accumulated since 1999 by working with Honda on its hybrid vehicles.
"The next one to two years will see many rivals competing [in the field]," Yokota said. He thinks carmakers are actively adopting new technologies. That means bigger opportunities for suppliers. Keihin hopes to sell its new system to at least three more automakers, including a Chinese one, in addition to Honda by the early 2020s.
In this huge period of transition for the auto industry, Keihin also faces challenges other than the shift to electric. In the past, Honda preferred Western mega suppliers. Under Takahiro Hachigo, president since 2015, the automaker has been sourcing more from group companies. Yet for Keihin, mega suppliers like Bosch, which also makes power control units, still remain a threat.
Currently 85% of Keihin's sales come from Honda group companies. "We want to halve the figure over the long term by expanding sales to other companies," Yokota said. The challenges facing Keihin are partly due to the fact that it is a supplier of engine parts. The company hopes to take advantage of the situation and improve its technology by doing business with companies other than Honda.