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"Due to the unique transaction system of the auto industry in Japan, the independence of parts makers is being compromised, and there is a lack of original technological strategies," said Masahide Matsushima, technical adviser of Japan Auto Parts Industries Association (JAPIA).

He spoke at the "Next-generation Automobile Seminar, 202X - the Future of Cars," an event that Nikkei Business and Nikkei Automotive Technology organized April 23, 2014.

The transactions between auto makers and parts makers in Japan are peculiar, compared with those in the US and Europe, Matsushima said. In Japan, automobile and parts makers are the dominators and the dominated, respectively, rather than business partners. As a result, the independence of parts makers is compromised, and auto makers also face problems, he said.

Specifically, the unique transaction system lowers competitiveness in global procurement, and the closed development system causes a lag in the introduction of technologies being standardized in the market. Moreover, the business grouping tends to slow down the speeds of accepting external capital, acquiring a company, etc. Therefore, in view of globalization, a system that allows to make quick decisions such as the system of an independent organization is more advantageous, Matsushima said.

For example, because each auto maker retains seat makers, there are a large number of seat makers in Japan, preventing consolidation. On the contrary, in some cases, the number of manufacturers that provide parts to seat makers is smaller than the number of seat makers, and the scales of the seat parts makers are larger than those of the seat makers, he said.

For the future, parts makers should decide whether they will provide "high-productivity parts that can be supplied to any customer" or "specialized parts that are customized to meet customers' preferences." The former strategy allows them to expand sales through joint project, consignment production, licensing, etc without launching a new business by themselves. On the other hand, the latter strategy enables them to provide parts to, for example, module suppliers as companies in the "second tier" or directly provide parts to auto makers as companies in the "first tier," Matsushima said.