Japan’s fragmented car manufacturing sector is likely headed for a wave of mergers and acquisitions, as rising geopolitical and competitive pressures force automakers to seek scale and efficiency, according to a report by Bloomberg citing a Man Group executive.
The report cites Stephen Harget, a Portfolio Manager at the world’s largest listed hedge fund firm, as saying that the combination of US tariffs and intensifying Chinese competition is creating a strategic imperative for Japanese automakers to consolidate.
“When an industry is really under pressure, consolidation is often a very good answer,” said Harget. “Japan has a lot of listed automakers, and consolidation would bring scale advantages and allow them to share investment burdens.”
Harget’s Man Japan CoreAlpha Fund, which takes a long-only approach, has outperformed 94% of peers over the past three years, returning 12%. Despite this, Japan’s auto sector index has dropped 21% over the past year, underperforming the broader Topix Index, which fell just 3.4%.
Top holdings in the fund include Toyota, Nissan, and Honda, according to data as of January.
Recent moves by the Trump administration to temporarily ease certain auto-related tariffs offered brief relief, but structural concerns remain. Harget argues that the rise of aggressive Chinese EV manufacturers, combined with protectionist US policies, has undermined Japan’s traditional “make-and-export” model.
He compares the current pressures to previous crises – such as the 2007 financial crash, the 2011 earthquake, and supply chain disruptions from Thai floods – but says this time is fundamentally different.
“We potentially have a crisis on our hands,” Harget noted. “Japan needs to grasp the opportunity through consolidation and enhanced corporate governance.”
Man Group sees particular M&A potential among underperforming automakers with weak balance sheets and negative free cash flow—firms increasingly vulnerable as margins tighten and capex demands rise.
Harget believes the wave of auto-sector consolidation may be unique to Japan, pointing out that most Western and Korean carmakers have already undergone significant restructuring over the past decade.
