Introduction
The Honda Motor Company is among Japan’s top motor vehicle producers and has over 200,000 thousand employees with three major branches: motor cycles, automobiles and power products (Frank 2003). In 2007, Honda was ranked third among top passenger car producers in Japan with a market share of 13.8% behind Nissan (18.6%) and Toyota (45.8%) (Shimbun 2007). The company held position three with a similar percentage in small-sized car production with Suzuki and Daihatsu taking position one and two respectively. However, Honda led the park among the top motorcycle producers in Japan at 55.5% (Shimbun 2007). In 2010, Honda motor company was ranked at position two with 600,157 units being sold in Japan alone. It was also ranked at position six among the world’s top motor vehicle manufacturers and was the second Japanese exporter to the USA and the rest of the world trailing behind behind the Toyota motor company (JETHRO 2010)
During the second quarter of the 2010 financial year, the company recorded a reduced profit of 54.2 billion yen which was a 56% decline when compared to the financial year 2009 (JETHRO 2010). This decline in the profit margin has been attributed to the fall in vehicle sales and the depreciation of the US dollar against the Yen. The company’s motor cycle sector has been pivotal in stabilizing its financial standing in the down turn in the auto industry. Focusing on small fuel efficient models has enabled the company resist the global economic slump thus putting it ahead of its rivals. Its hybrid vehicles are designated tax free in Japan (Gruden 2003).
FY2009 income data, in billions of Japanese Yen
Source: Honda 2009 annual report
Environmental Preservation
Honda motor company was among the first motor companies to position itself in the reduction of CO2 emissions which is a major issue that affects the environment. Advancing the hybrid car technologies has been used extensively by the company to cut on the carbon emission. The production of electric motorcycle is in line with the company’s goal of environmental friendly models which run on batteries and have a zero CO2 emissions (Sengupta & Jammalamadaka 2003).
With the Japanese automobile manufacturers coping with environmental stiff policies and regulations, Honda motor company has been in the frontline in environmentally conscious management surpassing its rivals. During the 2009-2010 financial year, the company cut its CO2 emissions by 12.6% in the automobile industry, 14.4% in power sports products and 10.8% in power equipment (Honda Environmental Annual Report 2010).This was in part possible due to public campaigns for the replacement of vehicles and other CO2 reduction measures (Honda Environmental Annual Report 2010).
Government Regulations
With rising concern over environmental pollution and the fact that motor vehicle are the leading emitters of the green house gases, several governments in the world have imposed strict environmental regulation on the exhaust gases from vehicles (Basshuysen & Schafer 1995). These regulations have in turn encouraged motor vehicle manufacturers to make innovation for environmental friendlier products. The Muskie Act (1970) in the USA passed stringent regulations requiring the motor industry to produce vehicles which would cut green house gas emissions to one-tenth (Mytelka & Boyle 2005).
However, this act faced fierce opposition from car makers in the USA resulting to in delay in its implementation. One year before this act was passed in USA, a similar act in Japan was proposed but because the Japanese carmaker were less vocal on environmental policymaking than their USA counterparts, obliged and in response concentrated on technological innovation (Mytelka & Boyle 2005). Competition among the vehicle manufactures and domestic public pressure were the major for the Japanese compliance. Following this move, Honda became the first company to comply with this regulation in its motorcycles and smaller automobiles. A new type of engine, the CVCC was developed.
Toyota and Nissan on the other hand achieved the target by creating a new catalyst instead of making modification with their engines (Gupta 2006). The company later adopted other clean vehicle technologies such as electric hybrid and fuel cell vehicles. More regulations enacted in USA in 1990s also had impacts on the Japanese auto makers as they depended so much on US market for their exports (Mytelka & Boyle 2005).During this time, the California air resource base in the United States enacted the low-emission regulation which demanded that general motors, Ford, Chrysler, Toyota, Nissan, Honda and Mazda include in their total sales, a small number of zero emission vehicles (ZEVs) as a means to mitigate environmental degradation. This percentage has been rising over the years from the initial 2% in 1998 to 10% in 2003 (Mytelka & Boyle 2005).
Many motor companies at the time argued that the policymakers lacked the knowledge that the alternatives to the traditional gasoline engines too presented similar challenges to both the technology and the infrastructure. Nonetheless, this regulation came into force at the end and in the process prompted the manufacturers to develop the ZEVs. In Japan, the drafting and environmental implementation for automobile emissions was delegated to the environmental agency, the ministry of environment and Japan’s ministry of international trade and industry (Jaffe, Lerner, & Stern 2004)
Main Drivers for Technological Changes
Pressure has been mounting on the motor vehicle manufacturers to produce vehicle designs distinct from the current internal combustion engine (ICEV) that pollute the environment. The battery powered electric vehicles, hybrid electric vehicles and the fuel cell electric vehicles have been the most discussed alternative vehicle models with the compressed natural gas vehicles, ethanol and methanol-fuelled vehicles also receiving similar popularity (Cowan & Hulten 2000). Due to the lock-in arising from the fierce competition in the internal combustion engine vehicle that is delaying developing of alternative design, the government of Japan has taken measures to support the development of efficient and environmental friendly vehicle designs.
The government of Japan has shifted its focus from a supply push strategy such as funding research and development and is nowadays focusing on the demand portion and on how scientific discoveries are being utilized in the society (Max 2004). This modern technical change theories followed by the Japanese government is influenced by social technical trajectories and acts as a guide. These social-technical trajectories bar other alternative technologies such as the internal combustion engine vehicle lock-in effects. The technical-change theory replaces the sequential linear model with a model in which both learning and interaction are at its core.
This model in which learning process and interaction is at the core of technical theory requires support at all levels of development and at the same time (Gulliksen & Herning 2008). For the interactive model to work, government acts as organizers of strategic niche market and modulates the market through taxes, legislation and the niche market legislation. Such a model creates a feedback to the research and development and in the process guide research. Thus, the concept of the interactive model that is based on voluntary agreements and soft compliance is to act as a modulation for the technical change towards the desired direction.
When choosing a technology to use in the linear model, the basic level is considered while determining the field of science to support. In linear model of technology development, the market guides the other levels of development ranging from demonstration to diffusion and requires no government intervention (Anderson & Anderson 2010). This model does not acknowledge all those other factors that bar the introduction of a new technology such as low infrastructure, lack of information and the high initial costs.
The sequential linear model on the other hand put into consideration barriers such as inadequate information, the split incentives and even the lock-in effects for the introduced technology, this motivates the government to support the new technology in all stages of development including diffusion (Gulliksen % Harning 2008). However, this model involves making very strategic technical choices such as deciding which technology should receive continued support especially the development and the deployment stages. Thus, for the right choice, perfect foresight in technical development and future market demands should be made.
The third model of technical change, the interactive model, does not clearly define the technological choice (Max 2004). However, it is obvious that governments cannot fully support all the experiments with all possible technologies; it has to prioritize on which technology to support. Path dependency is acknowledged as a natural development for the new technology in the interactive model, the model’s objective is to drive this path towards the right direction (Ison, Peake & Wall 2002). The new technology chosen is assumed to contain a natural path that is accepted by all the active companies, the governments and the other participants. The choice of the new technology thus is assumed to rise from experience gained from government-initiated experiments. Government acts as a trustee for the interest of the general public in the development process (Chandra 2006).
The Interactive model allows the established and large controlling companies to have a very important role resulting in their lack of making radical changes (Max 2004). As a check, it is important that regulatory approaches based on principles set by environmental policies be considered. Doing this allows outsiders to step in with more radical innovations. This principles need to be set ahead of time in a bid to promote innovation; it is a ‘technology-forcing advancement’. Such a strategy is the one being used by the California zero emission vehicles mandate which relied on setting standards rather than picking the winners (Max 2004).
Government regulation plays a major role in driving technological changes in the Honda motor company. Its support of the battery powered electric vehicles (BPEV) chosen by the ministry of international trade and industry and the establishment of a basic market expansion plan to expand BPEV development has seen the company embark on the development of vehicles with reduced emissions and low oil-dependence. The support offered by the government included the removal of trade barriers through technical development, revision of laws and taxes, erecting new standards and creating a fuel infrastructure (Dogobert & SAE 1995).
By 1997, MITI had altered its expansion plans to include under clean vehicles not only BPEVs but also hybrid electric vehicles, CNGVs, methanol fuelled vehicles and the fuel cell electric vehicles. This move has resulted in Honda coming up with three green vehicle models; insight (2001), civic hybrid (2004) and Accord hybrid (2004) (Honda Environmental Annual Report 2010). Technological advancement in Honda has been attributed to the general trend in the Japanese motor vehicle industry, the strength of the Honda lying in its ‘ultra capacitors’. Since the amendment of the Zero emission vehicle in 1996, there has been an increase in research and development and the production of series hybrid vehicles in Honda. By 2005, Honda had sold up to 48,000 hybrid cars (Anderson & Anderson 2010).
Study shows that Honda started conducting research and development in 1980’s although nickel metal hydrate batteries were produced first in 1990 in a joint venture with the Matsushita battery company (Anderson & Anderson 2010). The first electric vehicle by Honda was introduced in the Californian market in 1997. The insight hybrid models were first sold in 1999 and were closely followed by the civic and the accord models in the North American markets such as in California. The FCX-V1 and FCX-V2 models by the Honda motor company were the first fuel cell vehicles introduced in 1999 (Max 2004).This vehicles are based on methanol reformer and fuel cell stack. The FCX-V3 fuel cell model was out by mid 2000. Their FCX-V4 built in 2001 combined a high pressure hydrogen tank and the Ballard’s fuel cell stack.
The government of Japan has been increasing its foreign direct investment in China and especially in the manufacturing sector. This move has been motivated by the availability of cheap labour in china and in other foreign countries and is associated with relocation. The government has helped in the establishment of Honda’s affiliate part production in china thus creating new FDI cluster in the process. During the Japanese ‘bubble economy’ of 1990s; over borrowing and low interest rates led to faster growth in automobile industry. During the period 1990-2000, the government of Japan put together physical stimulus packages that have helped revive the motor industries (Flath 2000).
Environmental Policies
In 1990, the Californian ZEV mandate came into force and coupled with concerns over global warming and issue affecting energy, there was renewed interest in battery power electric vehicles (IEA & OECD 2004). This mandate made Japanese government to take a step and become a role model in environmental sustainability. There was a view that the Californian market should be taken seriously, following this, the Japanese car makers entered the battery power electric vehicle development race with seriousness. There was a need for new technology for any BPEV to enter into the Californian market by 1998. This period saw the introduction of permanent-magnet motor with more developments in the development of power traction.
Batteries were produced in large numbers with new developments being added to make them more efficient. The purchasing incentive program of 1997 saw the introduction of 117 BPEV where vehicles for export to the Californian market were equipped with NiMH batteries and permanent-magnetic motors. By 2000, the BPEVs became unaffordable to local people. A memorandum of agreement between the Californian state and major vehicle manufacturers including Honda and Toyota gave rise to a boom in the production of BPEVs in 1998. After the fulfilment of this agreement, production of the Honda EVplus ceased (Diane publishing company, 2004).
Following the failure of BPEV future market, MITI started the ACE program in 1997 (Cowan & Hulten 2000).This program too failed following the introduction of Prius by Toyota. Hybrid electric vehicles are today part of commercial option to ICEVs in Japan. However the HEVs account for only 1% of vehicles in Japan prompting authorities to shift focus to development of new concepts such as neighbourhood vehicles (Diane publishing company, 2004). The government of Japan through the MITI has for a long time used innovation as means of mitigating global warming and environmental pollution. It has identified the development of electric vehicles as a channel towards achieving its long term goal (Diane publishing company 2004).
The Honda top management has also rallied behind the government in the preservation of the environment. In June 1992, the company released its environmental statement and laid bare its commitments and guides to address environmental issues (Williams & Good 1995). In this statement, the company promise to preserve the environment and to make efforts to contribute to the human health thus ensuring a future for both the company and the entire world. Its principles sought to recycle materials, conserve energy, proper waste disposal, preserve human health and global environment (Williams & Good 1995).
Honda’s Environmental Compliance
Honda is aware of its responsibility to environmental preservation due to the impacts generated by its activities and its products. It has thus identified target to be met for its activities aimed at minimizing environmental impacts. Its major initiatives include fuel economy improvements, exhaust emissions reduction, alternative energy products and noise reduction (Guibet & Birchem 1999). To reduce the depletion of the ozone layer, the company has aimed at green purchasing, a process that touches on environmental management, saving of energy resources and the embracing of the ZEVs.
It reuses, recovers and recycles parts and practices proper waste disposal to tackle soil erosion (Honda Environmental Annual Report 2010). During the year ended 31st march 2010, the company’s major concern was addressing global climate change which saw Honda strongly reaffirm its continued commitment to innovation and the development of new products that are environmental friendlier (Cowan & Hulten 2000). According to the Honda 2010 environmental report for the North America (2010), the company in 2009 joined the USA and other carmakers in committing developments in fuel economy passenger vehicles for the period between 2012 and 2016.
The company launched a new Honda CR-Z sport in august 2010 and intends to launch a Honda Civic in 2011; all these vehicles are having increased fuel efficiency. The natural gas powered civic GX was also introduced in the North American market and the number of FCX Clarity-a fuel cell electric vehicle was also increased. January 2010 saw the start of operation for a solar hydrogen station at Los Angeles centre which utilizes solar cells to produce electricity used in reformation of hydrogen fuel from water (Honda Environmental Annual Report 2010). The company too aimed at reducing production of green house gases from their production plants in North America (Busshuysen & schafer 1995).
Awards
The Honda motor company’s environmental commitment has not gone unnoticed as the Honda’s Marysville and East liberty auto plants in Ohio, USA were awarded the energy star award from environmental protection agency (EPA) of the U.S. for running energy efficient plants (Anderson & Anderson 2010). In 2006, Honda’s four greenest vehicles earned recognition from the American council for an energy efficient economy (ACEEE) (Anderson & Anderson 2010). The company’s Honda civic and civic hybrids also appeared among the twelve greenest vehicles.
The union of concerned scientists (UCS), a science based non-profit making environmental friendly body, too recognised Honda’s commitment to environmental preservation and in 2007 named it greenest vehicle of the year. Honda’s ‘insight’ earned the highest EPA fuel economy rating in the year 2005 while accord hybrid sedan won Kiplinger’s best fuel economy in the $30,000-$45,000 category in 2006 (Honda 2010). Thirteen out of the company’s sixteen Honda branches in North America have achieved the ISO 14001 certification for environmental management systems while other branches aimed to achieve this certification by the end of 2010 (Honda Environmental Annual Report 2010).
Conclusion
Regulations, strengths and weaknesses in Honda has helped it shape the choice of its technological direction and the speed with which it moves towards this direction. Among the most influential foreign regulation was the Californian air resource board that exercised a tough influence on car manufacturers and was pivotal in shaping key market for the motor vehicle companies. The Honda motor company, with its diversified production, from the beginning invested heavily on the electric and hybrid vehicle technology. Among the company’s driving force in vehicle designs has been the government environmental policy and regulations. Rising environmental pollution concerns have forced various governments in the world to regulate emissions from motor vehicles.
As a result, automakers are encouraged to invest in innovations in environmental friendly vehicles. Acts have been enacted in many parts of the world especially in California to regulate environmental friendlier vehicles. The government of Japan has been following various innovation systems to support and control vehicle models with considerable environmental damage. Among these models are the interactive, linear and the sequential linear approaches. The sequential model takes into consideration barriers such as inadequate information and the split incentives. Interactive models do not define technological choice.
From its inception in 1948, the Honda motor company has lived true to its commitment for environmental preservation put forward by its founder. Following this, the company has introduced a number of green vehicles in the American markets and other markets in the world. The company has heavily invested in measures and projects aimed at reducing carbon dioxide emissions and the company’s efforts are bearing fruits as demonstrated in the year 2009-2010 in which the company reduced carbon emissions by an average 11%. Major initiatives by the company to reduce environmental pollution include fuel economy improvements, reduction of exhaust emissions, alternate energy products and noise reduction. Several models and designs of vehicle have been produced by Honda such as the Honda CR-Z sport, Honda civic and introduced in the Californian markets with increased fuel efficiency. The company’s environmental policy has won a number of awards beginning with the ISO14001, the UCS, the EPA and ACEEE.
Recommendations
The company should focus on the developing countries and develop components that are crucial for the advancement of electric vehicle. In these countries, Honda should make efforts hybrids and fuel cell vehicles and further create links with suppliers to whom it should provide with conventional gasoline vehicles. Further, the company should aim at improving batteries, motors, inverters and control systems and in effect advancement in electrical and electronic technologies which are pivotal in the production of hybrid vehicles.
Honda should strive to invest heavily in ‘drive-by-wire’ technology which is currently gaining ground due to the rise in the use of electronic technologies in power-trains in the hybrid vehicles. Under this technology, the mechanics of automobile are controlled in electronic manner. The new models of vehicle to be produced by motor vehicle manufacturers should have embedded soft wares more complicated to go hand in hand with complicated systems. Because companies have accumulated considerable knowledge on battery manufacturing, they should establish learning opportunities in developing countries to tap on the unexplored markets.
The company must make efforts to reduce product recalls such as the emissions-related recalls. This will make sure that the company reduces loses while the extra costs saved could be channelled towards further environmental conservation. This could be arrived by making accurate long term planning.
Plug-in hybrids will require a lot of experience on the working of hybrids, this might be very important in the future as this technology will not be expensive since they will not require infrastructure of hydrogen, this is despite the fact that in the long run, fuel-cell vehicles are considered clean vehicles.
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