Freeing Up Factories: Toyota to Consolidate Electronics Operations Within Denso

Toyota Motor Corp. says it had reached an agreement to consolidate all of its core electronics component operations within Denso. The move should allow Toyota to free up resources to compete more effectively in the new vehicle technology field.

Japan’s largest automaker noted it still has to discuss the logistics of transferring production of parts produced at its Hirose plant, near Toyota’s global headquarters, before the end of next year. But Denso, the company’s largest supplier, has already agreed to the core concept of the deal. By 2022, Denso will have taken over the mass production of all electronics components used in Toyota’s vehicles.

Taking advantage of the close relationship with a supplier it already owns a majority stake in allows Toyota to streamline some of its in-house parts production as it looks beyond making conventional automobiles.

“They’re basically pulling in all of the forces they need among the group companies to go electric. It’s reinforcing that they will be working very closely with Denso,” Janet Lewis, head of Asian transportation research at Macquarie Securities, told Reuters. “This move highlights the scope and scale of investment needed to develop all these new technologies.”

Toyota claims that, by consolidating mass-production development and production of electronic components of both Toyota and Denso within Denso, the pair could establish “a speedy and competitive development and production structure.”

The automaker could also focus more on the aforementioned new vehicle tech. With additional factory space and less production overlap, Toyota can turn its attention to assembling the components necessary for electric vehicles and autonomous hardware.

Both companies are strengthening ties within the industry to pool resources and avoid rising development costs. Toyota teamed up with Suzuki and Mazda to develop lower-emission internal combustion cars, while simultaneously working with Panasonic to develop next-generation battery technologies. Meanwhile, Denso formed partnerships with established electronics manufacturers like Toshiba Corp. as it cherry picks tech startups like ActiveScale.

[Image: Toyota]