Japan’s automotive industry is freaking out… sort of.

Japanese carmakers know they’ve been late to the autonomous driving party, while waiting for a low-risk, high-return option in this fledgling market. Trouble is, that strategy isn’t working.

I’ve been surprised at the hesitancy of many Japanese carmakers to pursue autonomous vehicle (AV) development. Along with this, they’ve done little to prepare for the onset of new transportation services using self-driving cars.

I suppose you could argue that the Japanese have been wiser than Western counterparts by intentionally avoiding the AV hype. Maybe so. But my reading is that's mistaking complacency for caution. Japanese car OEMs have been sitting on the fence in AV development, despite knowing that their vehicle sales could stall in the future, as more users worldwide opt for pay-per-use services over car ownership.

Japanese carmakers’ risk-averse strategy is perplexing, because we’ve all seen before how this movie plays out. Look at Japanese CE companies such as Sony, Panasonic and Sharp.

In the late 1980s, these electronics Godzillas looked almost invincible, so much so that they started to believe their own mythology. Japanese consumer companies thought they would continue to dominate the global market simply by keeping pace with advanced technology development in cameras, videos, TVs and mobile phones (in the pre-iPhone era).

The combination of a rising tide from Taiwan, Korea and China, and the rapid proliferation of app-driven digital devices overwhelmed the Japanese giants. Both trends fundamentally altered the nature of the CE business, eventually rendering Japan’s hardware-oriented consumer electronics business obsolete in the global market.

In the global automotive context today, the rising tide is lifting Google’s Waymo and a host of startups such as Uber, Didi Chuxing and Lyft. These companies aren’t competing with Japan on the manufacturing cost of hardware. They’ve figured out they can sidestep hardware issues entirely by shifting the automotive business from building cars to selling transportation services.

SoftBank and Toyota

Against this backdrop, Honda Motor and Hino Motors announced last week that they are joining Monet Technologies, a venture founded by SoftBank Corp. and Toyota Motor, to develop self-driving car services in Japan.

Honda and truck maker Hino — in which Toyota owns a majority stake — will each invest around 250 million yen ($2.27 million) in Monet. The new investment from Honda and Hino would leave SoftBank with a 40.2 percent stake in Monet, while Toyota will hold a 39.8 percent stake.

Toyota's e-Palette shown at CES 2018 (Photo: EE Times)

The types of transportation services Monet is proposing originally come from the idea of a mobility platform called “e-Palette” that Toyota floated at the Consumer Electronics Show in 2018. Although e-Palette seemed like pie-in-the-sky at the time, Toyota predicted then – and now Monet insists – that the first and most pervasive use of self-driven vehicles would be various commercial mobile services ranging from on-demand stores, distribution and food trucks, as well as on-demand shuttle bus services and mobile emergency rooms.

Using the power of Toyota and tech conglomerate SoftBank Group’s domestic telco arm, Monet announced last week that participation in its consortium expanded to 88 Japanese companies. They include Coca-Cola Bottlers Japan, beverage maker Suntory, Yamato Holdings (a delivery company) and Yahoo Japan. Their collaboration on projects could include product delivery or product-related services.

While such an ecosystem in Japan sounds all good, I still see Monet’s plan still as mostly pie in the sky. The hard reality is that despite the massive investment and software expertise necessary to roll out such services, the demand for those mobility-as-a-service (MaaS) offerings has yet to be tested.