Nissan President Makoto Uchida and Honda President Toshihiro Mibe discuss their proposed strategic alliance at a March 15 news conference in Tokyo. (© Sankei by Yoshinori Saito)
Are we about to see the formation of a new corporate alliance that will change the face of the auto industry? Honda Motor Co, Japan's second-largest domestic carmaker, and Nissan Motor Co, the third-largest, are considering a strategic alliance.
The automakers have signed a memorandum of understanding to begin discussions on a new alliance in the field of electric vehicles (EVs). The idea is for the two companies to jointly develop onboard software and standardize and jointly procure core components such as batteries for their EVs.
Up to now, the two companies have been competitors in both the domestic and international markets. But market conditions have been changing. Emerging manufacturers in countries like the United States and China are dominating the EV market due to their price competitiveness and rapid speed of development. Japanese automakers consequently feel a sense of crisis.
Gaining Efficiency, Reducing Costs
The aim of the proposed partnership between Honda and Nissan is to speed up development and take advantage of economies of scale. That way, they believe, they can reduce procurement costs. They hope that an alliance will increase their competitiveness and make them the leading brands in the global EV market.
Japanese motor vehicle manufacturers have lagged badly in the EV sector. Even Nissan, Japan's largest manufacturer of electric vehicles, only sold a little less than 140,000 EVs in 2023. That number pales in comparison to the 1.2 million units sold by the US carmaker Tesla, the world's top EV manufacturer, and its top rival, China's BYD Company Limited, which sold 1.57 million vehicles.
At a March 15 press conference, Honda's president Toshihiro Mibe did not attempt to downplay the sense of crisis. "We can't compete under the existing market structure," he stated.
Without subsidies, EV prices remain high. Furthermore, demand for electric vehicles appears to have sagged due to delays in establishing charging stations. German auto heavyweight Mercedes Benz AG has even dropped its plan to make all its new vehicles electric by 2030. Nevertheless, EVs remain a core technology in the effort to decarbonize motor vehicles.
Seeking Global Competitiveness
The manufactured products shipment value of Japan's domestic auto industry exceeds ¥50 trillion JPY ($330 billion USD). As well, related industries employ roughly 5.5 million workers. If this core industry is to be protected, Japanese automakers must also be competitive globally in terms of EVs.
Among Japanese carmakers, industry leader Toyota Motor Corporation is jointly developing EVs with Subaru Corporation, in which it has an equity stake. It is also seeking to standardize onboard systems with Mazda Motor Corporation. Nissan, also, already has an alliance with Mitsubishi Motors. If it partners with Honda, Japanese motor vehicle companies will have coalesced into two large camps on EVs.
Pressure from China
There is also considerable pressure from local manufacturers in China, where there is a fast-growing market for EVs. As a result, Japanese automakers are being forced to downsize their businesses.
In 2023, China also surpassed Japan in terms of the number of motor vehicle exports. (But there is also the factor of Japanese companies having substantial production in China.)
Hopefully, the two emerging camps among Japanese automakers will effectively pool their technologies and show a greater sense of urgency to strengthen their competitiveness in the field of EVs. By no means should we allow our motor vehicle industry, which has been a major stalwart of the Japanese economy, to decline.
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(Read the editorial in Japanese.)
Author: Editorial Board, The Sankei Shimbun
