A successful supplier selling winding tools to Tesla and Toyota

Deep in the electric vehicle industry’s supply chain is a little-known Japanese manufacturer that makes a seemingly mundane, yet essential device: winders.

If the motor is the heart of an electric vehicle, the coils are in turn the heart of the electric motor. Odawara Engineering Co., founded 70 years ago as a supplier for home appliance manufacturers, is an expert in making the dense loops of wire that go into these motors. Tesla Inc., maker of the Model S and Model 3 sedans and more recently the world’s most valuable automaker, is one of its biggest customers.

Although the coronavirus pandemic has sent global auto sales plummeting, BloombergNEF predicts economies will accelerate the adoption of electric vehicles as some countries opt to bolster funding for low-emission cars and infrastructure. The global winding machine market is expected to grow 10% annually and reach $1.3 billion in 2024, according to Global Info Research.

“We have to keep improving our machines,” said Masahiko Hoshina, vice president of Odawara Engineering. “Our customers can’t win if they can’t differentiate their products.”

Electromagnetic coils interact with magnets to turn electrical energy into motion, the basic principle behind the motors that power everything from drills to commuter trains.

Located in Odawara, a town about 90 kilometers (56 miles) west of Tokyo, the company’s main business during Japan’s post-war economic boom was building winding machines for refrigerator manufacturers. and air conditioners. Besides Tesla, the company also has Toyota Motor Corp. and Nissan Motor Co. among its customers. In 2018, Tesla accounted for 12% of Odawara Engineering’s sales, but in 2019 that number likely fell below 10%, the threshold for reporting such numbers.

Strong demand for Odawara Engineering’s machinery means it will likely keep its outlook intact for the current year. The company kept its operating profit forecast of 700 million yen ($6.5 million) and revenue of 14.5 billion yen intact when it reported results in May, as the outbreak of Covid-19 has shut down economies around the world.

“The shift to electrification and automation won’t change,” even during the pandemic, said Akihiko Kawazoe, an analyst at Toyo Securities. “The company is unlikely to be impacted as much by the coronavirus. Its sales will likely be in line with its outlook.”

Odawara Engineering’s Hoshina said the company’s backlog for coil winding machines had grown since December, and he said the maker was now focused on cutting costs. The bigger companies in the industry are buying up the smaller ones and the competition is becoming more global, he said.

In 2018, the German Schaeffler AG bought Elmotec Statomat GmbH & Co., a winding technology company. ABB Ltd and Thyssenkrupp AG have joined CWIEME, a global trade and exhibition group for windings and electric motors. Odawara Engineering also competes with Tana Automation Co., Nittoku Co. and China’s Changzhou Jinkang Precision Mechanism Co.

In order to accommodate more wires in the motors, Odawara is working on “hairpin” winders. Instead of round wires, square-shaped wires are used to pack more into electric motors, improving their efficiency and performance. Denso Corp. was among the pioneers in the development of hairpin winding technology.

Even as the market grows, Odawara Engineering will focus on developing innovations instead of rushing to add capacity, according to Hoshina. Because the machines are complicated and hand-built, simply adding more workers wouldn’t work, he said.

“We plan to grow gradually by choosing our customers,” Hoshina said. “By looking at which customers and which drivers are promising.”

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