Carlyle sees big in Japan’s auto industry as electric vehicle shift shakes up supply chains

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TOKYO, Nov 22 (Reuters) – U.S. private equity firm Carlyle Group Inc (CG.O) aims to expand its footprint in Japan’s auto sector as the global shift to electric vehicles (EVs) shakes up the industry’s supply chain, its executives said.

As the world rapidly shifts to electric vehicles, Japanese auto parts suppliers are looking at strategies that have traditionally suited combustion engine cars, Reiji Terasaka, who leads Carlyle’s Japanese industrial team, told Reuters in an interview. .

“They’re thinking very innovatively about what they can do, and that’s creating a lot of (investment) opportunities for private equity,” Terasaka said, pointing to Carlyle’s global business networks, which its portfolio companies could exploit to find potential partners abroad.

Japan’s auto industry drew its strength from its decades-old keiretsu system – a hierarchical pyramid of equity-linked suppliers with automakers sitting at the top and providing security for the company.

But the shift to electric vehicles, which require fewer parts but different expertise, such as software engineering, is likely to reshape the core of Japanese industry, analysts say.

Automakers may no longer be able to support all sorts of keiretsu businesses, Terasaka said, adding that he anticipates changes in how the keiretsu system works.

Carlyle this month announced a 38 billion yen ($270.75 million) takeover bid for Totoku Electric Co Ltd. (5807.T)a manufacturer of electrical cables whose products include wiring for automotive heated seats.

Brian Bernasek, co-head of Carlyle’s U.S. buyout and growth team, said in the same interview that the firm could help portfolio companies expand overseas by supporting them in finding global talent. , digitization, procurement and regulatory compliance.

The private equity industry “has evolved over the last 10 to 20 years from where the focus was more on cost,” Bernasek said.

“Today we focus a lot more on how you grow the business, bring digital tools, different approaches to go to market, more strategies around pricing and product rationalization,” he said. -he adds.

($1 = 140.3500 yen)

Reporting by Makiko Yamazaki; Editing by Bradley Perrett

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