Déjà Vu for Japan? Why Automakers Risk Repeating the Electronics Industry’s Fall

Japan’s automotive industry is now at a turning point. For decades, Japanese automakers have been symbols of reliability, quality, and engineering excellence. Efficient production systems, constant innovation, and global expansion have shaped the modern automotive world.

Yet in the era of the Software-Defined Vehicle (SDV), these strengths alone may not be enough. Japan has seen this story before. Once-dominant consumer electronics — from iconic portable music players to advanced mobile phones and televisions — quickly lost their global position when software and digital ecosystems reshaped competition.

The concern today is clear: even with their hardware superiority, Japanese automakers could face the same fate.

In the early 2000s, Japan was a powerhouse in consumer electronics, dominating mobile phones and home appliances. But after the launch of the iPhone and Android smartphones, Japanese companies failed to keep pace with software-driven ecosystems. Despite building high-quality hardware, they neglected app stores, regular updates, and user experiences — the true differentiators of the smartphone era.

The same occurred in televisions. Domestic brands once had large global market shares, but in the smart TV era, software platforms became the deciding factor. As a result, many Japanese devices became dependent on overseas ODMs for production.

The lesson for the auto industry is clear: hardware leadership alone is not sufficient for long-term competitiveness.

Japanese automakers are also investing in software, aiming to develop next-generation vehicle operating systems and integrated platforms. However, progress has been limited, and early results have fallen short of the original ambition.

Industry analysts note that compared to new entrants and certain global leaders, Japanese manufacturers are still lagging in digital competitiveness. Scale and reputation alone do not guarantee digital leadership.

The contrast between traditional automakers and emerging software-driven companies illustrates the stakes.

Traditional Automakers

Software-First Entrants

From a consumer perspective, traditional automakers are often seen as “catching up” in software, while new entrants market their cars as cutting-edge digital devices. This situation is reminiscent of the past, when Japanese mobile phones led in hardware but lost the market to software-driven ecosystems.

Even European automakers face delays and cost overruns due to software challenges. Transitioning to zonal architectures and scaling up large software teams is already a formidable task. In Japan, cultural and organizational barriers make these challenges even more pronounced.

Experts note that traditional OEMs are tied down by their hardware-centric history, making the transition to a software-first mindset particularly difficult.

If Japanese automakers cannot close the software gap, they risk outsourcing the most valuable layer of the car — the digital experience. Vehicles may continue to be assembled in Japan, but the key sources of value — digital services, data monetization, autonomous features — could fall into the hands of overseas companies.

As in consumer electronics, Japanese brands could remain in name, but the true competitive advantage may lie elsewhere.

Japan’s automakers are not destined to decline. They still hold significant advantages: engineering excellence, global trust, and unmatched production expertise. But unless the software gap is addressed with urgency, history may repeat itself.

The smartphone story is a painful reminder: hardware dominance means little without software leadership. The transformation is already underway, and the next decade will determine whether Japanese OEMs remain global leaders — or fade into nostalgia, remembered only as names on cars running someone else’s operating system.