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E-Axles and Nidec Corporation's Big Bet on the Electric Vehicle Market

Oct 29, 2020 5:41 AM 4 min read

Nidec Corporation is the world's leading manufacturer of small precision motors. These motors are found in a range of electronic devices, from hard-disk drives to iPhones (the thing that makes your phone go buzz when on silent).

And they helped Nidec become a 1.5-trillion-yen ($14bn) company.

Now, the Kyoto-based manufacturer has its eyes set on a different sector altogether: the auto industry. Specifically, electric vehicles (EVs). Just as Nidec commands the largest global market share for the tiny spindle motors in electronic gadgets, it wants to secure a lion’s share of the “e-axle” market.

What are e-axles?

We’ve all seen an axle - it’s basically the shaft or rod that connects two wheels in vehicles. The wheels rotate around the axle, which supports the entire motion.

An e-axle finds application in EVs. It combines its gear, motor and power-control electronics. This technology helps convert the electricity stored in the battery of the EV into propulsion power that can make the vehicle move.

Besides underpinning this power conversion, e-axles also recover energy lost in braking and return the same to the battery to recharge it while the vehicle moves (i.e. Regenerative braking).

This is important to note, because EVs can operate without e-axles too, but at a fraction of the efficiency possible.


But why are we talking about the e-axle?

Because just as is the case with most mainstream consumer products from laptops to air-conditioners, while the end-product market may be competitive, the markets for the technologies that prop up these products are highly monopolised by a handful of firms. Think semiconductor chips (Intel, Qualcomm and TSM), refrigerators (Haier, Whirlpool), robotics (Kuka) - or even financial services like credit card payments (Mastercard, Visa).

The e-axle market is expected to be worth $20-30bn a year by 2030, up from an estimated $2.8-3bn now. As EV adoption picks up pace, demand for e-axles will inadvertently soar. And the company - or companies - that invest heavily and smartly in the technology early on stands to reap the benefits.


Now, coming back to Nidec...

Nidec’s 76-year-old Founder, Shigenobu Nagamori, is not in two minds about his intentions with the e-axle market.

“The gut technologies of EVs are going to become...commoditised or standardised,” he told an earnings news conference earlier this year. His goal is to make Nidec command at least 35% of the market within this decade.

How does Nidec plan to become an e-axle leader?

By making the technology inexpensive.

Nagamori opines the way to do this is by being able to manufacture every component and sub-component that goes into making an e-axle...and then building up scale to simply produce more.

This is why Nidec Corp. Has been on the hunt to acquire companies in related sectors so as to improve its own specialisations. And this has been on the cards since at least 2014, when it acquired automotive electronic control system producer Honda Elesys Co. From Honda. (Interestingly, 2014 was when the world’s first mass-produced two speed e-axle was unveiled.)

Pursuing M&A as a strategy for expansion is something Nidec is quite familiar with. It has c. 300 subsidiaries across Asia, Europe and the Americas. (FYI: These include the world's leading manufacturers of LCD panel handling robots and camera shutters.)

Now, to further its e-axle technical prowess, Nidec is eyeing JATCO, an automotive transmission producer, 75% owned by Nissan. Nagamori wants to combine JATCO with Nidec’s motor and power-control electronics business, and believes the former is up for grabs due to the financial stress that has been plaguing Nissan, which was once the world’s largest EV manufacturer.


Moves and countermoves

Nidec’s desire to become the undisputed e-axle leader is bound to be a steep and challenging climb. There are many powerful auto giants that already have skin in the game, so the Japanese motor manufacturer has its work cut out for it.

The fight to control the e-axle market is reshaping the EV industry - and, ipso facto, the automobile industry. (FYI: As of 2019, 82% of the market volume is accounted for by Europe and China.)

Besides Nidec, there are other forces at play. Last year, Japan’s automotive components manufacturers Denso and Aisin formed a joint venture called BluE Nexus (in which Toyota bought a 10% stake this year).

This year, America’s BorgWarner acquired UK-based Delphi even as Japan’s Hitachi Automotive merged with three Honda Group suppliers.

Meanwhile, Volkswagen + Ford and Toyota + smaller Japanese brands are each forming an EV technology alliance in part to drive down e-axle manufacturing costs.

Tesla, GM and Nissan are also designing and investing in their own e-axle systems.

There’s evidently a lot happening in the EV market. In the near-term, as consumer demand and the industry mature, a handful of major manufacturers are likely to take control of the bulk of the e-axle market. Until then, enjoy the corporate chess!


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