JAPAN Trends and Developments Contributed by: Haseru Roku and Yoshiteru Matsuzaki, Nagashima Ohno & Tsunematsu
SDV and autonomous driving partnerships Major SDV developments in 2024–25 reflect partner- ships between traditional automakers and technolo- gy sector players. These partnerships mark strategic shifts towards sourcing software and AI capabilities from specialised technology firms rather than in- house keiretsu development. Domestic partnerships include NTT Data and Den- so’s commitment to build a 3,000-person software development organisation by 2030 (June 2024), and Honda-Nissan’s strategic partnership for EV and SDV development (August 2024). Multiple automak- ers invested in tier IV (June 2024), reflecting archi- tectural divergence in autonomous driving: compet- ing sensor architectures and software methodologies drive minority investments that maintain technologi- cal optionality, contrasting with Tesla’s camera-only approach and Waymo’s sensor fusion architecture. International partnerships include Toyota’s alliance with NVIDIA for AI-based autonomous driving (Janu- ary 2025) and SoftBank’s minority investment in Way- ve (May 2024). These partnerships reflect Japanese original equipment manufacturers (OEMs) maintain- ing flexibility through multiple technology relation- ships rather than exclusive commitments as technical standards emerge. Organisational transformation and implementation challenges The transformation affects traditional supplier rela- tionships. As vehicle value shifts from mechanical components to software and electronics, the supplier structure built around hardware manufacturing faces restructuring. These partnerships require automotive companies to bridge fundamental cultural differences alongside technical integration challenges – closed vertical integration versus agile software practices, and hard- ware-centric architectures versus software-defined platforms – explaining why minority investments with operational autonomy are preferred over full acqui- sitions requiring both organisational and techni- cal transformation. Traditional automotive norms of closed vertical integration and detailed specifications conflict with software industry practices emphasising
This transformation exemplifies the layer 4 (physical and embedded AI) investment patterns identified in the foregoing. Distinctive capability gaps and organi- sational integration complexities create characteristic transaction patterns favouring partnerships combined with minority investments. Two major factors appear to drive automotive AI investments towards partnership-plus-minority- investment structures. • Integration constraints: Automotive manufactur- ers require specialised software and AI expertise outside of traditional keiretsu networks, but organi- sational incompatibilities (hardware-centric vertical integration versus agile software practices) make full acquisition integration challenging. • Technical uncertainty: Autonomous driving faces competing approaches across sensor architec- tures – light detection and ranging (LiDAR)-based, camera-based, sensor fusion – and software methodologies (end-to-end deep learning versus modular approaches). Minority investments provide capability access while maintaining flexibility as standards emerge, avoiding permanent commit- ments to approaches that may become obsolete. These factors help explain why automotive AI invest- ments predominantly emphasise partnerships and minority investments. However, full acquisitions occur when strategic integration into existing operations is essential, or where operational control is required to capture value. Woven by Toyota’s acquisition of automotive operating system (OS) developer Renovo Motors exemplifies this pattern, securing platform capabilities requiring direct integration with Toyota’s SDV architecture. From vertical integration to cross-industry collaboration Mitsubishi Motors’ agreement to procure EVs from Foxconn’s subsidiary Foxtron (May–June 2025), with the majority of production being outsourced, exempli- fies SDV’s structural impact: traditional keiretsu -based vertical integration gives way to cross-industry tech- nology partnerships mirroring consumer electronics contract manufacturing.
186 CHAMBERS.COM
Powered by FlippingBook