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5. Hitachi Automotive Systems, Ltd. Business Report FY ended Mar. 2016

Hitachi Automotive Systems, Ltd. Business Report FY ended Mar. 2016

-IFRS

-In FY ended March 2016, revenues achieved the previous prospect (Revenues: JPY 1,000 billion, Adjusted operating income ratio: 6.8%), but adjusted operating income ratio was 6.2%, which is 0.6 points down from the prospect. Slowdown of demand in China resulted in decreased sales of high-profit products.

-IFRS

Reconsidered business plan FY2018 (ending March 2019)

-The Company revised revenues to JPY 1,100 billion, an increase of 9.9% of results in FY ended Mar. 2016 (FY2015). Adjusted operating income was revised to JPY 77 billion, an increase of 24.4% from FY2015. The overseas sales ratio for customer's base was 60% in FY2015, and set the aim to 63% in FY 2018.

Strategies by product

• Expand the electronically controlled and electrically driven products business and
  promote systemization in this high growth market
  -More efficient internal combustion engines, electrically driven products, enhanced safety performance

Current-status grasping and future aim
Increase the percentage electronics products (*1) of the Company's overall sales to 60%
by FY 2020 (Percentage in FY 2014: 47%)

*1： Electronic control unit, hybrid system and other products

Growth prediction of the sales profit FY 2015 to FY 2018：
Motors (+190%), Inverters (+170%), Electric power steering (+120%), Electronically
controlled brakes (+100%) , Electric VTC (+70%), Electric brakes (+40%), Lithium-ion
batteries and controllers (+40%), Stereo cameras (+20%), Electronically controlled
suspension (+20%)

• Accelerate system development to achieve early commercialization of autonomous driving
  -Aiming for 10% share of information and safety market, predicted to be worth over 3 trillion yen by 2020-
  
  
• Achieve growth through Hitachi Group collaborative solutions
  -Provide high quality “one stop” solutions in the autonomous driving systems field
  
  
• Conduct public road demonstration experiments of autonomous driving using mass produced prototypes

Customer strategy

• Execution of the customer diversity strategy ：
  Expand accounts with revenues exceeding JPY 100 billion.
  
  
• Increase revenues in business with Ford through cross-sales
  (FY2008⇒FY2018: Revenues increased 3 fold to exceed JPY 100 billion)
  
  

Regional strategy：Action for two major markets

• Americas：FY 2010 to FY 2018 revenues will grow 2.2 times (USD)
  *Strengthen local technology centers to improve service for customers in the Americas.
  *Strengthen intraregional control and governance through integration of Mexican
  subsidiaries.
  　-Hitachi Automotive Systems Mexico, S.A. de C.V. (Integrated 2 Mexican subsidiaries in
  October 2015)
  
  
• China：FY 2010 to FY 2018 revenues will grow 2.3 times (RMB)
  *Achieve growth outpacing overall market growth heading towards 2018.
  *Establish 15th manufacturing company in China to meet the needs of auto makers that
  are expanding bases in inland China (April 2016)
  　-Hitachi Automotive Systems (Chongqing) Ltd. (Scheduled to start mass production in
  2018)

Organization established

-On April 1, 2016, the Company will establish a new "Information & Safety Systems Division" with the aim of strengthening its autonomous driving systems business. The Company is looking to expand its business by actively promoting and selling its newest products and Hitachi Group's technologies to car makers. The new division will encompass a "Global Business Planning Department" for developing business strategies, as well as a "Development & Design Division," and "System Quality Assurance Department." The new division will start with 200 members, and expand as necessary. The Company is seeking to enhance its proposal making ability by combining its integrated control technology with the information and communications systems of Hitachi Ltd., Clarion Co., Ltd., and other Hitachi Group companies. (From an article in the Nikkan Jidosha Shimbun on March 11, 2016)

Merger

-The Company announced that it will absorb two of its wholly owned subsidiaries, Hitachi Automotive Systems Steering, Ltd. and Hitachi Automotive Systems Kyushu, Ltd., into its own operations effective April 1, 2016. Hitachi Automotive Systems Steering (Saitama Prefecture) develops and manufactures steering products, while Hitachi Automotive Systems Kyushu (Fukuoka Prefecture) develops and produces propeller shafts and pistons. Hitachi Automotive Systems aims to accelerate its global expansion of these growing business areas through this integration. (From an article in the Nikkan Jidosha Shimbun on December 3, 2015)

Public road demonstration experiments of autonomous driving

-On February 22, the Company will start autonomous driving tests on a toll road in Hitachinaka City, Ibaraki Prefecture. This is it's first time public road demonstration experiment of autonomous driving. The Company will test maneuvers such as lane changes and passing other cars through the combined use of an omnidirectional sensor and high-precision map data. Highway driving is assumed to be "Level 2" autonomous driving. Its test vehicle was revealed to the press at the Company's Sawa Works on February 19. The test car is based on Fuji Heavy Industries' Impreza, and is equipped with stereo cameras, millimeter-wave radars, and SurroundEye omnidirectional monitoring system provided by Clarion Co., Ltd.. Information from these sensing technologies will be integrated by the vehicle's ECU, which controls steering and braking systems. One feature of this autonomous driving system is that all the sensing, information processing, and control technologies, including a central gateway and high-precision mapping MPU, were provided within the Hitachi Group. These units are installed in the vehicle, eliminating the need for bringing in special computers and creating an environment similar to future production vehicles. (From an article in the Nikkan Jidosha Shimbun on February 22, 2016)

-The Company has started test runs for autonomous driving in city-street driving in the U.S. state of Michigan. The Company will test advanced driver assistance systems and connected vehicle technologies at a facility specifically designed for testing autonomous driving. These test runs are conducted as part of the Mcity testing project for automated and connected vehicles. The project was established through cooperation among industry, government and academia, such as the State of Michigan and the University of Michigan. Mcity provides a test environment simulating city-street driving under various weather conditions at a 130,000-square-meter site. (From an article in the Nikkan Jidosha Shimbun on September 29, 2015)

Contract

Stereo camera
-The Company announced that its stereo camera with small lenses is used in Suzuki Motor’s "Hustler", "Hustler X", and the special edition "Hustler J STYLE II". The lens width of the stereo camera is half that of the Company’s conventional products. Applying an image recognition processing technology, the stereo camera alone can offer safe driving support functions including pedestrian/vehicle collision mitigation, lane departure warning, lane sway warning, lead vehicle start alert, and erroneous start prevention. This stereo camera is also used on the "Spacia" and "Spacia Custom" mini vehicles as well as the "Solio" and "Solio Bandit" compact vehicles from Suzuki. (From a press release on December 21, 2015)

Lithium-ion battery
-The Company announced that its lithium-ion battery packs are used in the new Nissan "Murano Hybrid" launched in China. This battery pack comprises a battery module that contains cylindrical battery cells and a Battery Management System in a single housing. The battery cells are manufactured by Hitachi Vehicle Energy, Ltd. (From an article in the Nikkan Jidosha Shimbun on October 14, 2015)

-The Company announced that its lithium-ion battery pack has been selected for use on the "X-Trail Hybrid" launched by Nissan Motor Co., Ltd. The lithium-ion battery pack used in the "X-Trail Hybrid" comprises a battery module that houses cylindrical battery cells and a Battery Management System (BMS). Hitachi Vehicle Energy, Ltd. (in Hitachinaka City, Ibaraki Prefecture), a member of the Hitachi Group, manufactures the battery cells at the company's Tokai Plant (in Hitachinaka City). The battery cells are assembled into battery packs at the Kentucky Plant of Hitachi Automotive Systems Americas, Inc. and the battery packs are supplied to Nissan. (From an article in the Nikkan Jidosha Shimbun on June 2, 2015)

-The Company will supply 5,000 W/kg high output power density prismatic lithium-ion battery cells to General Motors Company, LLC (GM). The cells will be mounted on the "Chevrolet Malibu Hybrid" to be launched by GM in 2016. These cells employ heat resistant separators to ensure the ionic conductivity between the positive and negative electrodes, achieving both high output power density and safety. In addition to this, GM chose the battery cell because of its ability to maintain its high output power density even at minus 30 degrees Celsius. (From an article in the Nikkan Jidosha Shimbun on May 20, 2015)

Award

-Business cooperation was evaluated by Ford and won "World Excellence Award" in May 2015.

-IFRS

-The Company plans JPY 76 billion for FY ending Mar. 2017, and JPY 110 billion for FY ending Mar. 2019, which is a 60% increase from FY ended Mar. 2016. Strengthen technology development around fields such as ADAS and autonomous driving.

R&D Structure

-Established Silicon Valley Office in April 2016. Strengthen the development of new products in autonomous driving and connected cars.

Software development reinforcement
-Utilize R&D capability of the Hitachi group
-Established automotive software division at Hitachi group software companies.
-Employ around 200 software developers in China.（Clarion’s IVI, camera development, etc.)


-The Company plans to more than double the number of its engineers in China to 500 by FY 2016 (year ending in March 2017) from the current approximately 200. The Company has a goal of doubling its sales in the growing automotive market of China by FY 2018. Boosting the number of engineers will enable the Company to speed up the development of more cost-competitive products for the local market. The Company's Chinese operations, which currently supply their products mainly to Japanese companies, intend to increase their business with European, the U.S., and Chinese automakers having a substantial share in the market. (From an article in the Nikkan Jidosha Shimbun on September 28, 2015)

Strengthen industry-university-government collaboration

R&D activity

-The Company will develop a new lithium-ion battery whose energy density is twice the current level by the fiscal year ending in March 2019. The new lithium-ion battery will be designed for use in hybrid vehicles (HVs) and plug-in hybrid vehicles (PHVs). There is a growing demand for lithium-ion batteries to be fitted on HVs. In addition, many automakers are now introducing PHVs in Europe to meet stricter carbon dioxide (CO2) emission standards by the European Union. By developing a smaller lithium-ion battery with higher capacity, which is indispensable to improving performances of HVs and PHVs, the Company aims to receive orders for a wide range of models by OEMs in Japan as well as Europe and the U.S. (From an article in the Nikkan Jidosha Shimbun on September 15, 2015)

Product Development

Prototype of a portable breathalyzer that works with smart keys
-This breathalyzer can detect, with a high degree of reliability, the characteristic, saturated vapor exhaled uniquely by humans. It was developed based on sensor technology enabling it to be made compact and require only a small amount of energy. The breathalyzer works in tandem with smart keys used to unlock doors and start engines, in that, the results of the breathalyzer tests are shown on the vehicle display panel.

Millimeter wave radar to detect front objects using a horn type antenna
-The Company has developed a 77 GHz millimeter wave radar to detect front objects using a horn type antenna. The antenna substrate is 30-40% smaller than the conventional substrate, while securing detection ability of more than 200 meters. A millimeter wave radar using a horn type antenna has not been put into commercial application. The Company will combine the radar with a stereo camera, its primary product, and market it as an autonomous driving system in the European market. In Europe, the average driving speed is high and longer detection distance is required for millimeter wave radars. (From an article in the Nikkan Jidosha Shimbun on December 9, 2015)

Advanced electronic control unit
-The Cmpany has developed an advanced electronic control unit (ECU) that can control the information recognition system and the vehicle control system simultaneously. The Company is readying for mass production of this ECU that can support autonomous driving. Such integrated control unit is the world’s first of its kind. The technology significantly reduces the time required for the autonomous drive system to process and respond to sensor and navigation information inputs. It is expected to help automakers that aim to release autonomous cars as soon as possible. (From an article in the Nikkan Jidosha Shimbun on November 12, 2015)

Basic technique to prevent collisions
-The Company, Hitachi, Ltd., and Clarion Co., Ltd. announced that they have developed a basic technology that can prevent collisions while maintaining safe and practical speeds, by predicting changes in pedestrian movements and calculating optimum speed patterns in real time. The companies have verified the validity of this technology by using their experimental vehicles. Through repeated trials, the companies will accelerate the development of the technology and the commercialization of autonomous driving technologies. (From a press release on October 14, 2015)

Inverters for electric vehicles
-The Company and Hitachi, Ltd. have developed a new inverter for use in electrified vehicles. The new inverter reduces power loss by 60% and doubles power capacity compared with the Companies' conventional inverters. The new inverter houses silicon carbide (SiC) power semiconductors in parallel and enables high-speed switching. The two companies will be promoting the improvement of power efficiency in hybrid vehicles and other electrified vehicles that their system provides. This inverter was developed using Hitachi's semiconductor technology and the Company's inverter technology. (From an article in the Nikkan Jidosha Shimbun on September 29, 2015)

Electronic control technology of semi-active suspension
-The Company has developed a new electronic control technology for semi-active suspensions. The Company developed algorithms to analyze vehicle vibration and tilt more precisely. These algorithms are incorporated in a semi-active suspension's new electronic control unit that suppresses vehicle vibration during driving and restricts changes in vehicle positions while turning on curves by 10 %, respectively. The new technology improves both driving comfort and steering stability, which was previously difficult to achieve simultaneously. (From an article in the Nikkan Jidosha Shimbun on April 24, 2015)

-During fiscal year that ended Mar. 2016, the Company invested JPY 72.5 billion to increase production volume of automotive components.

-During fiscal year that ended Mar. 2017, the Company will invest JPY 80 billion to increase production volume of automotive components.

-In the original business plan (settled in June, 2015), the Company planned capital spending of JPY 280 billion from FY ended March 2015 to FY ended March 2017, but it was reduce to JPY 240 billion in the revised plan settle in June, 2016.

Investment Outside Japan

-The Company announced that it will merge its two existing subsidiaries in Mexico and form a new company on October 1, 2015. The two companies are Hitachi Automotive Systems Queretaro, S.A. de C.V. in the State of Queretaro, which produces suspensions and brakes, and Hitachi Automotive Systems Mexico, S.A. de C.V. in the State of Mexico, which produces pumps, balancers, ignition coils, pistons, and aluminum die castings. Hitachi Automotive Systems Queretaro will be the surviving company, but the new company will adopt a corporate name, Hitachi Automotive Systems Mexico. The new subsidiary will be owned by Hitachi Automotive Systems (shareholding of over 99%) and Hitachi Automotive Systems Americas. (From an article in the Nikkan Jidosha Shimbun on September 15, 2015)


-The Company will establish a new manufacturing subsidiary for chassis-based products and engine management systems in Chongqing City, China, in 2016. The subsidiary is slated to start operations in 2018. This will be the Company’s 13th consolidated manufacturing subsidiary in China and the first in Chongqing City. The company expects this new subsidiary will facilitate its business expansion in China to meet increasing demand for automobiles. The new company will be capitalized at CNY 300 million (JPY 5.94 billion), 90% of which is funded by Hitachi Automotive Systems (China) Ltd., the Chinese regional headquarters of the Company, and the remaining 10% by Hitachi (China), Ltd. The new subsidiary will initially produce steering products and propeller shafts from 2018, and will add engine management systems later. (From an article in the Nikkan Jidosha Shimbun on June 20, 2015)


-The Company announced that it has held an inauguration ceremony for its new plant in Chennai, India. The plant in southern India will serve as the Company's second production base in the country. Investment in this project has reached INR 3.13 billion (approximately JPY 5 billion). The plant will introduce global standard production lines, and will manufacture automotive engine-related products such as valve timing control systems and ignition coils, starting in October 2015. (From an article in the Nikkan Jidosha Shimbun on April 17, 2015)