Honda and Nissan will work together to stay in the electric vehicle race

 

Volkswagen said it may collaborate with Renault, days after Honda and Nissan said they would work together to develop electric cars, as traditional carmakers join forces in the face of the threat from Chinese EVs.

Japan’s second and third-largest carmakers are putting aside their historically bitter rivalry as the established industry braces itself for a coming wave of high-tech, low-cost models from China.

“The rise of emerging players is becoming faster and stronger. Honda President Toshihiro Mibe said, “Companies that cannot respond to the changes will be eliminated.” “We took our discussions from the perspective of whether we can remain the top runner or survive even in 2030.”

Carmakers from the US to Europe and Asia are already facing rising costs due to new technology developments and stricter emissions regulations, while also struggling to develop cheap electric vehicles they can sell profitably.

Once an auto laggard, China is using battery technology and car manufacturing knowledge gained from international manufacturers to produce next-generation EVs designed for export to the world’s automotive heartlands.

The CEOs of the two Japanese groups said on Friday that the scope of their cooperation will include software, core EV components and auto intelligence technology. The agreement came only as a non-binding memorandum of understanding, raising questions among analysts about the extent of their commitment.

Still, the companies said they were not considering a capital tie-up at the moment, but did not rule out the possibility. “All these discussions will take place from now on,” said Nissan Chief Executive Makoto Uchida. “There’s no time to sit back and relax.”

Nissan and Honda, which sell about 4 million vehicles a year globally, hope to cut costs by pooling their resources. They were surprised by the rise of China’s domestic EV groups like BYD, which overtook Tesla for the first time in the last quarter of 2023.

Honda shares rose 1.7 percent ahead of Friday’s announcement, while Nissan shares rose 3.2 percent. Honda already has an alliance with General Motors to use its battery technology, although it has not been specified whether this partnership will be affected.

The pair will decide in the coming months whether they will move forward with developing a vehicle that can be built in Europe and sold profitably for less than €25,000.

The deal with Honda comes after Nissan reached an agreement last year to rebalance its capital relationship with its long-term alliance partner Renault. As part of the deal, the French carmaker reduced its 43 percent stake in Nissan, while the Japanese group gained voting rights for its 15 percent stake in Renault. The alliance also includes smaller partner Mitsubishi Motors.

“This partnership with Honda is proof that all the efforts Nissan has made with its alliance partners Renault and Mitsubishi Motors have borne no fruit,” said Koji Endo, head of equity research at SBI Securities. “It seems to be an act of desperation but it is not clear whether Nissan engineers will be able to work closely with Honda engineers.”

Japanese government figures tried to bring Nissan and Honda together for merger talks in late 2019 amid fears that Japan’s huge car manufacturing base is losing its edge as the shift toward EVs introduces more competition. Has occurred.

But the project failed after both parties immediately rejected the idea. Honda executives in particular pushed back, pointing to Nissan’s complex capital structure with Renault, a person close to the talks said at the time. Nissan was equally opposed to the idea as the group focused on getting its existing alliance back on track.

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