March 18, 2024
TOKYO – The Japanese automobile industry has reached a turning point. Honda Motor Co. and Nissan Motor Co., Japan’s second and third-largest automakers, announced on Friday that they have agreed to begin a feasibility study of a strategic partnership mainly in the field of electric vehicles. They aim to be more competitive when it comes to costs by standardizing core components for EVs. With the auto industry entering a period of once-in-a-century transformation with the advent of Chinese automakers, a sense of urgency over lagging behind in the EV market pushed the two firms to consider joining forces.
Two months of talks
“Emerging companies are becoming competitive extremely quickly. We are aware that we might be shaken out.” Toshihiro Mibe, president of Honda, said emphatically at a press conference on Friday.
Major Japanese automakers, including Honda and Nissan, have made sizable investments in storage battery plants and other facilities for EVs, but they have been struggling as Chinese automakers introduce low-priced EVs.
In mid-January, Nissan began high-level discussions with Honda, which has remained independent in research and development. The announcement on Friday comes only two months after several rounds of talks between the two companies.
Nissan President Makoto Uchida said, “If we take time to predict what things will be like five years from now, there is no time to waste.” Mibe said, “In order to remain leading players [in the future], it was now or never to make a move.” Instead of worrying about the details, the two companies apparently decided to launch their partnership negotiations to make a breakthrough on their struggles in the EV market.
Effects of mass production
Nissan leads the EV market in Japan but faces many challenges overseas. Nissan plans to reduce production capacity by about 30% in China due to sluggish sales. In Europe, Nissan has a mutual stake in Renault Group and has been working with a Renault-affiliated EV company. However, in Japan and the United States, the company urgently needs to build a cooperative partnership with other companies to reduce costs.
Honda aims to have EVs, and fuel cell vehicles (FCVs) represent all of its new vehicle sales by 2040, but the prospect of achieving that goal is unclear. In the United States, Honda has been collaborating with General Motors Co., but in Japan, it has been hampered by its stance of working alone in development and production.
Sakura, a light EV developed and produced jointly by Nissan and Mitsubishi Motors Corp., has sold 60,000 units since it went on sale domestically in 2022. Meanwhile, Honda has not been able to launch a light EV, and its domestic sales of EVs was 286 units in 2023.
Mibe said, “We will make the most of mass production efforts [through the partnership].”
If the partnership between the two automakers expands further in the future, it may alter the market share of top manufacturers in the auto industry in Japan.
The Japanese auto industry has been structured as an alliance between Toyota Motor Corp., Subaru Corp. and Mazda Motor Corp.; an alliance between Nissan and Mitsubishi Motors; and the independent Honda.
Both Honda and Nissan presidents denied any talks of a capital tie-up for now, but they are expected to consider having Mitsubishi Motors, which has close ties with Nissan, join this latest partnership framework.
However, many challenges lie ahead for the partnership. Honda has long worked by itself. Some say Honda was passive in forming the partnership and that the difference in corporate cultures will become a barrier. Coordination with a wide range of parts suppliers is also expected to be difficult.