Rival Japanese car makers Honda and Nissan have announced they will work together to develop electric vehicle (EV) technology and auto intelligence – two sectors where Japan’s automakers have fallen behind.
The partnership could help the two manufacturers develop economies of scale in producing EVs, as automakers face heavy competition from firms such as Elon Musk’s Tesla and Chinese manufacturer BYD.
The announcement by the two arch-rival firms has been described by experts as an attempt to catch up with EV competitors, particularly from China, after years of Japanese car companies focusing on hybrid vehicles.
Why are Honda and Nissan working together?
Nissan was an early pioneer in electric vehicles, with its all-electric Leaf model released in 2010.
But it has struggled alongside other legacy car companies in the face of increasing competition from new entrants.
«Emerging players are very aggressive and are making inroads at incredible speed,» Nissan CEO Makoto Uchida told a media conference announcing the deal with Honda on Friday.
«We cannot win the competition as long as we stick to conventional wisdom and a traditional approach,» he said.
According to Toby Hagon, veteran motoring writer and editor of EV Central, electric vehicles are very expensive to develop and manufacture.
«In a battery-electric vehicle, by far the most expensive component is the battery,» he said.
«It can run into sometimes tens of thousands of dollars.
«Once you scale up and you put them across more vehicles, and scale the development across multiple brands, that can end up reducing the cost.»
Japanese automakers such as Honda and Nissan have fallen behind rivals like Tesla and BYD in developing EVs, partly because they have historically been so successful with combustion engine vehicles.
Toyota, the world’s largest automaker, has often said the world is not ready for a complete shift to electric vehicles, in part because of the lack of a charging infrastructure, and instead has pushed hybrids, which have a gas engine in addition to an electric motor.
But Toyota is also expected to aggressively deliver on an EV push in coming years.
Why are Chinese EV brands so much cheaper than others?
Hagon said Chinese EV manufacturers enjoyed several advantages over global competitors.
«There’s four or five main battery manufacturers around the world, some of which are based in China,» he said.
«And one of them, BYD – which is now a vehicle manufacturer – started as a battery manufacturer.
«They have a fairly significant advantage over a lot of their rivals in that they control the manufacturing of those batteries.»
Hagon said Chinese brands had also been successful at developing a more affordable battery chemistry – called lithium iron phosphate, or lithium ferrous phosphate (LFP).
«They don’t have quite the energy density of the more common NMC batteries but they are a lot more affordable to manufacture,» he said.
«That’s given Chinese manufacturers a bit of an advantage and made them more affordable in the showroom.»
He said assistance from the Chinese government was crucial in the development of cheaper EVs.
«They’ve been working on trying to play a dominant role in electric vehicle technology for 15 or 20 years now,» he said.
«The reality is the Chinese brands are, in some cases, a decade ahead of the rest of the world.»
What’s included in the Honda-Nissan agreement?
The two companies have signed a non-binding memorandum of understanding but have yet to determine the final scope of the arrangement.
Honda president Toshihiro Mibe said the companies shared common values and could create «synergies» in facing their formidable rivals.
Japan’s Nikkei newspaper reported the agreement could include the introduction of a common powertrain, joint procurement and the development of a common platform.
The companies will develop core technologies together, but their products will remain different.
Nissan CEO Makoto Uchida said they were open to working together both in Japan and overseas.
The firm has existing business alliances with Renault and Mitsubishi, but these will not be affected by the arrangement with Honda, according to Mr Uchida.
«We are strapped for time and need to be speedy,» Honda’s president Mr Mibe declared.
«In 2030, to be in a good position, we need a decision now.»
Seiji Sugiura, senior analyst at Tokai Tokyo Research Institute, said the deal gave the companies six years to work together on EVs.
«I read it as both companies trying to take their time rather than rush into a hasty collaboration,» Mr Sugiura said.
Will this deal save EV buyers money?
The companies will explore cost-cutting measures, Honda president Toshihiro Mibe said, adding that achieving cost-effectiveness required greater production levels.
Hagon said the deal had the potential to create cheaper EVs for buyers but it would depend on company choices.
«Any tie-up like this has the potential to reduce manufacturing and development costs and engineering costs,» he said.
«Whether that’s passed on to consumers in terms of lower prices, or whether it fattens profits, who knows,» he added.
He said it would depend on the market and the price positioning of the various vehicles.
«There certainly should be some savings there, it just depends how – and if – they’re passed on.»
«I don’t think you’ll see the Japanese brands necessarily get into a price war with the Chinese manufacturers because the Chinese manufacturers have some pretty sharp pricing going on and I think it’d be hard to match that.
«But they’ll want to be competitive in some way. Whether that’s trying to pitch as better quality, or a superior drive, or better technology.»
When might we see these vehicles in Australia?
Honda wants to increase its ratio of electric vehicles and fuel cell vehicles to 100 per cent of all sales by 2040.
Hagon said while Japanese brands had recently been «way off the pace» with electric vehicles, we should see many new electric models in the second half of the 2020s.
He also said many Australians were likely to be open to buying a Japanese-made EV.
«Japanese manufacturers are still the biggest suppliers of vehicles to Australians,» he said.
«Australians love Japanese cars. So there’s still a very strong affinity there with Japanese vehicles.
«But the reality is they’ve got to shift up a gear or two to try and meet the new emission standards that are due to come into force.»
ABC/wires
