Nidec emerges as e-axle supplier for electric cars

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The miniature engines that silently buzz iPhones helped Japan’s Nidec become a 1.5 trillion yen ($ 14 billion) company.

In recent years, Nidec’s founder Shigenobu Nagamori has turned his attention to automobiles and a technology that converts electricity stored in the battery into propulsion power.

Called an e-axle or e-drive, this technology is emerging as a new competitive front as the automotive industry shifts to electric vehicles. By 2030, Nagamori says he wants to have a 35% share of a global e-axes market expected to be worth $ 20-30 billion a year by then, up from an estimated $ 2.8 – $ 3 billion now.

He is betting that electric cars will follow the same route as aircons, washing machines and computers in rooms, with key components such as engine systems and central processing units standardized and supplied by a few dominant technology companies.

“Laptops and aircons from different manufacturers may look different from the outside, but if you look inside, the (main) parts are more or less the same. EV’s gut technologies will be commoditized or standardized just as much as these items,” said Mr. Nagamori. a press conference on earnings earlier this year. E-axles and batteries will come from a few competing suppliers, he predicted.

To ensure that Nidec emerges as one of these suppliers, Nagamori, a no-nonsense 76-year-old, has set his sights on acquiring gear maker JATCO from Nissan Motor Co and combining it with the engine and power control electronics of Nidec. Some details of this effort that Nissan is resisting are first reported here. The takeover battle underscores how quickly electrification is reshaping the auto industry.

“Nidec brings to the auto industry the approach to the tech industry,” said Daiwa Securities analyst Shiro Sakamaki. “Like cell phones and laptops, car models are already being redesigned at an increasing pace and Nagamori is betting that the trend will accelerate and that car manufacturers will leave the development and production of technologies such as the e-axis to suppliers.”

Nagamori declined to be interviewed for this article. Nidec declined to comment on his pursuit of JATCO.

A BRIEF HISTORY OF THE E-AS

The e-axis, or e-drive, combines the gear, motor and power control electronics of an electric vehicle. It is the ‘brain’ that determines how a vehicle manages the energy stored in its battery and converts it into energy. It also helps to reclaim the energy lost during braking and return it to the battery.

In other words, a well-designed e-axle maximizes a vehicle’s power and acceleration and helps increase range and smoothness.

The technology has emerged as a competitive front in part because carmakers are under pressure to cut the manufacturing costs of electric vehicles to make them as affordable as regular gasoline cars. E-axis systems and batteries provide the industry with the greatest margins for efficiency gains and cost savings.

Advances in new technologies are critical to global efforts to reduce CO2 emissions. According to Zifei Yang, an analyst with the International Council on Clean Transportation in Washington, CO2 emissions from vehicles account for about 17% of emissions from all sources. In addition, says Yang, the rate of reduction in vehicle emissions has slowed as more people drive larger, more polluting SUVs. Other analysts point to trends in emerging economies such as China and India, where large numbers of middle-class consumers trade mopeds for cars.

Some automotive technology suppliers have joined forces to create e-axis systems. Japanese Denso and Aisin formed a joint venture called BluE Nexus in 2019 and Toyota moved earlier this year to invest in the company by taking a 10% stake. This year, US parts supplier BorgeWarner agreed to acquire UK based Delphi, and Japanese Hitachi Automotive merged with three Honda suppliers. Automakers Volkswagen and Ford, and Toyota and smaller Japanese brands each form an EV technology alliance, in part to reduce electric axle manufacturing costs.

Tesla initially developed its own e-axle technology. Reuters could not determine whether it will continue to use it in more recent models.

GM, Nissan and a few other automakers believe that e-axles offer such a wide margin for cost savings and product differentiation that they want to design and manufacture their own systems. GM believes it can better integrate the e-axle with the battery and the rest of the vehicle, providing a quieter, smoother and more fuel-efficient ride, said Adam Kwiatkowski, GM’s chief executive engineer for global electric propulsion systems.

“Technologies in a vehicle that are technically complicated, contain a lot of IP and are capital intensive, you can always better design and manufacture them yourself,” Kwiatkowski told Reuters in an interview.

If GM doesn’t design its own e-axles, Kwiatkowski added, it will have to buy them, it will not be sure of their technicalities or efficiency, and will be locked into drive unit designs that may not be optimal.

A DIFFERENT APPROACH

Nidec’s Nagamori has said he believes the way to become the market leader in e-axes is to focus on making the technology cheap. The way to do that, he says, is to be able to produce every part and sub-technology that fits into an e-drive system, and build scale to produce more.

Partly for this reason, Nidec, a motor specialist, has been looking for companies with expertise in power electronics. It acquired Honda Elesys Co, a manufacturer of automotive electronic control systems, in 2014 from Honda and in 2019 from the automotive electronics division of Japan’s Omron Corp.

To conclude the e-axis technical loop, Nidec has set its sights on JATCO, an automotive transmission manufacturer based in Fuji town at the base of Mt. Fuji, 75% owned by Nissan.

According to two sources familiar with Nagamori’s thinking, Nidec’s founder believes JATCO is in the game because of financial troubles at Nissan that have already forced the automaker to sell non-essential assets, including its fleet of corporate jets.

Over the past year, Nidec has poached several Nissan executives, including former Vice COO Jun Seki.

Nagamori managed to hire Seki shortly after being passed over for Nissan’s top job last year. The news came late on October 8, 2019 that Makoto Uchida had been chosen as Nissan’s new global chef. The next morning, Seki received a call from a headhunter, one of the sources said. Nagamori wanted to sit with him.

Soon after, Seki traveled to Kyoto to meet with Nagamori, intending to reject the approach, the source said. Instead, Nagamori persuaded Seki to help Nidec ride the wave of electrification that is engulfing the auto industry and turning Nidec into a 10 trillion yen company by 2035.

In November, as talks between the two men progressed, Nidec contacted Nissan about his interest in taking a controlling stake in JATCO. The answer was “no”, according to well-placed sources at Nidec and Nissan, as Nissan’s top executives want to keep key e-axis technology in-house. Nissan declined to comment on the matter.

At the end of December, Seki resigned from Nissan and on January 13 of this year he boarded the high-speed train to Kyoto, eventually taking on the position of President and COO of Nidec. One of Seki’s first tasks was to recruit more top talent from Nissan, which he did by bringing in some of his former colleagues, and finalize the acquisition of JATCO.

In February, Nidec approached Nissan again about the acquisition of JATCO, and again Nissan’s answer was “no,” said the same well-placed sources at Nidec and Nissan. According to these sources, Nissan’s COO Ashwani Gupta told Seki and other Nidec executives that Nissan views JATCO as “one of our core technology competencies” and is only interested in forming an alliance to work together to develop the next generation e-mail. ash technology. The sources said Gupta added that if Nissan was desperate for money, it would sell its 1.5% stake in Daimler AG before selling its stake in JATCO. Nissan declined to comment.

Nissan echoed the message on Aug. 6 when two Nidec executives visited the automaker’s global headquarters in Yokohama, one of the well-placed sources said. Then, on August 19, Gupta told JATCO headquarters staff that JATCO is “an important asset to Nissan” and a “partner.” JATCO spokeswoman Masako Fujita confirmed the gist of Gupta’s comments.

Nagamori remains confident in the prospects for Nidec’s e-axis business. He plans to pump 500 billion yen into setting up factories in China, Mexico and Poland and investing in the technology. And Nidec is addressing what some competitors describe as aggressive pricing by dropping the price for automakers to about $ 1,200 to $ 1,300, well below the industry’s estimated average cost of $ 1,800.

Nidec has entered into supply agreements with Geely, as well as with GAC Motor and its joint ventures with Toyota Motor Corp and the Chinese EV upstart NIO. It is also rumored that Nidec recently struck additional deals to supply Geely’s joint venture with Daimler and a joint venture between Great Wall Motor and BMW. Nidec declined to comment on the deal rumors. It also declined to comment on prices.

(Reporting by Norihiko Shirouzu; additional reporting by Makiko Yamazaki in Tokyo and Paul Leinert in Detroit; edited by Janet McBride)