The most crucial aspect of the extensive strategic partnership on electrification, agreed upon by Honda and Nissan Motor Co., Ltd. on the 1st, revolves around next-generation vehicles known as “SDVs (Software Defined Vehicles),” which are controlled by software. Major EV companies like Tesla in the United States and BYD in China are leading the way in this area, prompting Honda and Nissan to join forces. “We can’t take over the world with the way we’ve been doing things up until now,” said Honda President Toshihiro Mibe.
Adding New Features Through Software Updates
SDVs will fundamentally transform car manufacturing, with IT elements such as on-board operating systems (OS) and artificial intelligence (AI) serving as the development base instead of traditional mechanical parts. Software updates will enable modifications and new functionalities, while apps, like those on smartphones, can be introduced to offer various services to car occupants. Service businesses utilizing data collected through networks and power from on-board batteries are expected to even alter the profit structure of manufacturers.
SDVs, which align well with electric vehicles such as EVs, are anticipated to shape the future competitiveness of the domestic automobile industry as decarbonization progresses. The government also announced a strategy in May, aiming for Japanese automakers to capture a 30% share of global sales by 2030.
Time Required to Introduce “Basic Technology”
However, developing software for SDVs, such as an in-car OS, requires enormous investments of “four digits of billions of yen” (Mr. Sanbe). “We need allies to increase our competitiveness,” said Nissan Motors President Makoto Uchida.
Toyota Motor Corp. was already collaborating with capital partners Mazda and Subaru in the electrification field, including developing its in-car operating system “Aline,” as well as battery and hybrid technology. The formation of this corporate alliance to compete against the Toyota camp has created a scenario where the two major domestic forces will vie to enhance the competitiveness of “Hinomaru SDV.”
“We want to have it out before 2030,” said Sanbe, but it will take time before Honda and Nissan can launch the next-generation in-car OS and other fundamental technologies for SDVs. It is unclear how much synergy the developers of both companies, each confident in their own technology, can achieve through their collaboration. The two companies are cautious, stating that the content of their agreed-upon joint research is based on fundamental research, and mass production development will depend on the results.
Early Strengthening of Sales Capabilities is a Priority
Nissan has struggled to sell new cars in North America and China, with its April-June operating profits down about 99% from the same period last year. If the sales base of the three companies, including Mitsubishi Motors, about 8.33 million vehicles, were to shrink, the economies of scale of cooperation could become nothing more than a pipe dream. The first priority is for each company to quickly strengthen its sales base through strategic alliances on batteries, EV parts known as “e-axles,” and vehicles that complement each other.
The key to the success of the three-company alliance is for Honda, Nissan, and Mitsubishi Motors to enhance their respective brand power.
