Japanese auto rivals Nissan Motor and Honda Motor said on Friday that they are thinking about forming a strategic alliance to work together on developing essential parts for electric cars and integrating artificial intelligence into automotive software systems.

Given the fierce rivalry China’s BYD, Tesla, and other manufacturers present to Japan’s automakers, the possible alliance might help the two achieve economies of scale in the production of EVs.

With its all-electric Leaf model, Nissan led the way in EV technology. However, like other established manufacturers, Nissan has suffered in the face of fierce competition from more agile newcomers.

“Emerging players are very aggressive and are making inroads at incredible speed,” Nissan CEO Makoto Uchida told a press briefing.

“We cannot win the competition as long as we stick to conventional wisdom and a traditional approach,” he said.

Battery-powered cars made up less than 0.5% of Honda’s global sales of over 2.8 million automobiles during the first nine months of 2023, according to company data. The company’s sales similarly trail those of its competitors.

According to Honda President Toshihiro Mibe, the two businesses have signed a non-binding memorandum of understanding to explore possible areas of cooperation, although the extent has not yet been decided.

According to Uchida, they are willing to collaborate in any area in Japan as well as beyond.

He claimed that a possible combination between Nissan and Honda would not impact the company’s current commercial relationships with Renault and Mitsubishi Motors.

Nissan and Renault collaborate on EVs, mostly in Europe. Constructed in the same northern French facility as the new Renault Five, the next Nissan electric Micra will have the same architecture.

Last year, Nissan and Renault scaled back the scope of their long-standing partnership, and Renault has since inked deals with new partners including China’s Geely.

According to Uchida, Nissan and Honda were willing to work with current partners if the right opportunity presented itself.

According to Honda’s Mibe, the firms will look into cost-cutting strategies, but he also added that higher production levels are necessary to achieve cost-effectiveness.

By 2040, Honda hopes to have 100% of its sales come from electric and fuel cell vehicles.

Although Nissan and Honda have not yet discussed a capital partnership, Mibe stated that they are not ruling out the idea in the future.

“We are strapped for time and need to be speedy,” he stated. “In 2030 to be in a good position we need a decision now.”

Still, it provides the businesses with six years to collaborate on EVs, according to Tokai Tokyo Research Institute senior analyst Seiji Sugiura. “I read it as both companies trying to take their time rather than rush into a hasty collaboration,” Sugiura stated.

TV Tokyo initially reported about Nissan’s alliance pursuits. According to the publication Nikkei, possible concrete actions include developing a unified platform, introducing a common powertrain, and working together on procurement.

(Adapted from TopGear.com)

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