Honda signs partnership papers with Nissan for EV production

Partnership has been viewed as a direct answer to the influx of affordable electric vehicles from China in both Japan and Europe.

Japanese automotive giants, Nissan and Honda, said Friday they were exploring a strategic partnership in electric vehicles to face up to a “once-in-a-century” upheaval in the car industry.

Taking on the Chinese

Analysts said the move was aimed at catching up with Chinese competitors who have stolen a march in EVs while Japanese firms have lost ground by focusing more on hybrid vehicles.

“We are not competing only with the traditional car makers, but also with new players… with innovative products and new business models” as well as “overwhelming price competitiveness and amazing speed,” said Nissan CEO, Makoto Uchida.

“We cannot win the competition as long as we stick to conventional wisdom and traditional approach,” he told a joint news conference announcing a feasibility study of the partnership.

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The scope includes automotive software platforms, core components related to EVs, and complementary products, the companies said.

Media reports said the partnership could include joint development of a common EV powertrain, a so-called e-axle, and joint procurement of batteries.

Honda CEO, Toshihiro Mibe, said that there was a “once-in-a-century transformation in the automotive industry”.

“Our study criteria will be whether the synergy of the technologies and knowledge that our companies have cultivated will enable us to become industry leaders by creating new value for the automotive industry,” he said.

Rising EV sales

Hybrids that combine battery power and internal combustion engines have proved enduringly popular in Japan, accounting for 40% of sales in 2022.

But Japanese firms’ focus on hybrids has left them in the slow lane in meeting the growing appetite for purely electric vehicles.

Just 1.7% of cars sold in Japan in 2022 were electric compared to 15% in western Europe and 5.3% in the United States.

EVs accounted for as much as 20% of new cars sold in China in 2022, and the strength of Chinese auto firms helped the country overtake Japan as the world’s biggest auto exporter last year.

Honda and Nissan are even considering cutting production capacity in China as sales decline, according to media reports.

“Both of the companies are not at a high-enough scale to create enough profit margins… so they are actually under pressure to find a partnership,” said Chris Redl, an auto analyst in Japan.

“Even though they were very fierce rivals historically, it makes more sense for Nissan to get together with a Japanese company like Honda, rather than having these cultural wars with an alliance partner like Renault” of France, he said.

Honda in October scrapped a tie-up aimed at making “affordable” EVs with US giant General Motors although the two firms are aiming to deploy self-driving taxis in Tokyo from 2026.

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