Honda-Nissan alliance completes consolidation of Japanese auto industry

Honda Motor Co. and Nissan Motor Co. agreed this week to expand on a preliminary agreement reached in March, offering more details on how they plan to work together and adding Mitsubishi Motors Corp. Although the companies have not yet discussed a capital alliance, one is possible, Honda Chief Executive Officer Toshihiro Mibe said.

The partnership will involve joint work on developing software, batteries and other components for electric vehicles, as well as electric vehicle charging and energy services, the three companies said. Their rapprochement comes after Toyota took stakes in Subaru Corp., Suzuki Motor Corp. and Mazda Motor Corp. and helped those companies navigate a tense era for traditional automakers.

Also read: From Maruti to Tata and others, less joy and more caution as July sales dip

While Toyota has locked horns with its domestic rivals from a position of strength — it has been the world’s best-selling carmaker for four years running — Honda, Nissan and Mitsubishi are much smaller players on the global stage. Their merger is seen as a move by the Japanese government to strengthen its auto industry as China emerges as the world’s new No. 1 car exporter.

“The government is coordinating this to build a competitive auto industry,” said James Hong, an analyst at Macquarie Securities Korea Ltd., adding that most automakers in Japan are too small to invest in electric vehicles individually. “It looks like a politically driven alliance.”

While the U.S. had the Big Three — General Motors Co., Ford Motor Co. and Chrysler, now owned by Stellantis NV — and Germany had a similar one — Volkswagen Group, BMW AG and Mercedes-Benz, Japan had a much larger number of automakers producing vehicles worldwide.

Honda, Nissan and Mitsubishi combined sold about 4 million vehicles worldwide in the first six months of the year, far below the 5.2 million that Toyota sold alone. While the three companies touted the potential for synergies from their collaboration, executives also acknowledged that they would have to overcome contrasts with their compatriots.

“Even though we have different cultures, we share the same challenges,” Nissan CEO Makoto Uchida said at a news conference with Mibe.

Nissan, Honda and Mitsubishi are lagging behind in the transition to what automakers are increasingly calling software-defined vehicles, which run on code as much as or more than the combustion-engine-powered cars of the past. The Japanese government set a goal last month for its companies to account for 30 percent of the software-defined vehicle market by 2030.

In addition to working together on software including automated driving, connectivity and artificial intelligence, the automakers could share battery specifications and supplies. Honda and Nissan are also considering changing the designations of their cars, which are being considered for both internal combustion engine and battery-powered vehicles. The companies did not provide details on specific models or outline how they might complement each other depending on the region.

Also read: Will Tata Motors make hybrid cars in India? Top official rejects position

Honda has announced plans to invest 10 trillion yen in electrification this decade, while Nissan is bringing its expertise to the table with the introduction of the first all-electric car of the modern era, the Leaf, in 2010. Mitsubishi Motors is a leader in plug-in hybrid electric vehicles and has a strong presence in Southeast Asia.

China is also a key factor behind the Honda-Nissan-Mitsubishi Motors partnership. All Japanese carmakers are losing share in the world’s largest car market, largely because of the growing popularity of electric vehicles.

Honda and Nissan saw sales fall 40 percent and 27 percent, respectively, in China in June after some local plants closed. Honda last week decided to cut production of gasoline cars by 19 percent. Mitsubishi Motors withdrew last year.

Also read: Nissan X-Trail presented in ₹49.9 lakh, will compete with Toyota Fortuner and MG Gloster

“Honda and Nissan are struggling in China and will have to make more electric vehicles to stay there,” said Tatsuo Yoshida, senior auto analyst at Bloomberg Intelligence. So the alliance “makes sense.”

For Nissan, the Honda deal further weakens the company’s alliance with Renault SA. While the French carmaker rescued Nissan more than two decades ago with a cash injection and the hiring of former Chief Executive Carlos Ghosn, it is now in the process of paring its cross-holdings and unwinding aspects of its decades-long partnership.

Watch: India’s Promising Electric Vehicle Market | All About Electric Vehicles | HT Auto

Mitsubishi joined the alliance in 2016 when Nissan invested in the smaller carmaker. Nissan now owns about a third of the company.

The Honda-Nissan partnership will be more even than the one between Nissan and Renault, according to Seiji Sugiura, an analyst at Tokai Tokyo Intelligence Laboratory Co.

“Nissan couldn’t resist what Renault said,” Sugiura said, adding that they would now be able to leverage each other’s strengths. “They weren’t really equal partners,” he said.

Honda had been working with General Motors Co. on electric powertrains and software, but last year canceled plans to develop small electric vehicles. Nissan’s ties with Renault, which have always been tense, worsened after Ghosn was arrested in 2018 on charges of inflating his salary, which he has denied.

Date first published: Aug 03, 2024, 16:39 PM IST