Japan is intensifying its push to have automakers develop smart cars with advanced safety and entertainment systems managed through cloud technology. This initiative comes as Japanese car manufacturers lag behind their counterparts in the US and China.
The Japanese government has set an ambitious goal: to ensure that Japanese companies capture 30% of the global market for software-defined vehicles (SDVs) by 2030. By that year, it is projected that global sales of SDVs will reach between 35 million and 41 million units. The Ministry of Economy, Trade and Industry (METI) plans to support this goal by providing financial aid and fostering the development of IT talent through partnerships with universities and re-skilling programs.
While Japanese cars currently feature driving assistance technology and map navigation systems, they lack more sophisticated capabilities. The government aims to create an ecosystem where companies can share data and generate revenue from after-sales services, reflecting a shift in the auto industry’s business model. For instance, global revenue from robo-taxi services is projected to reach ¥80 trillion ($503 billion) by 2035, with 80% of this revenue coming from services beyond vehicle sales, according to METI.
“We anticipate that the majority of profits in these businesses will not come from new car sales. Instead, the business model will evolve, with greater profits derived after the sale of the car,” said Ito Takeru, director at METI’s mobility digital transformation office.
Among Japanese automakers, Nissan Motor Co. is planning to launch an autonomous vehicle ride-share service in 2027 to address the shortage of taxi drivers. Honda Motor Co. aims to roll out a self-driving taxi service by the end of the decade, having revised its initial plan to deploy a robo-taxi in central Tokyo by early 2026.
Additionally, Japan recently established the Automotive and Battery Traceability Center Association Inc., a platform designed to ensure secure and safe data exchange among companies in the automotive and battery supply chain. This initiative is expected to enhance the competitiveness of Japan’s car industry.
Analysis:
The push towards SDVs represents a significant opportunity for Japan to regain its competitive edge in the global automotive market. By leveraging cloud technology and enhancing vehicle intelligence, Japanese automakers can tap into new revenue streams through data-driven services and after-sales innovations. This strategic shift not only addresses current market challenges but also positions Japan to capitalize on the growing demand for autonomous and connected vehicles.
The integration of advanced features in Japanese vehicles can drive substantial profit margins, primarily through post-sale services such as maintenance, software updates, and data analytics. Moreover, the projected growth in robo-taxi services offers a lucrative market that Japanese companies can explore, potentially leading to substantial financial gains and market share expansion.
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