Honda and Nissan chief executives announced on Friday 15^th March that they will begin collaboration on the technology for electric vehicles. 

The work within the partnership, which came as a non-binding memorandum of understanding (MoU), will include auto intelligence technology, EV software and various EV components. There was no mention of the joint collaboration on EV models however.

This announcement comes as Chinese EV manufacturers continue to flood the market with low-cost EVs, sparking concern for the legacy automakers who have traditionally dominated vehicle spaces. Honda and Nissan have long had a fierce rivalry within the automotive industry, but are now feeling the pressure on losing out in the EV race to Chinese automakers such as BYD, who’s sales have soared in recent times. This is particularly apparent within the rest of Asia, which has historically been a key market for Honda and Nissan. However, they are now losing market share to China’s affordable EVs at a considerable rate.

A key driving factor for success over the next 10 years will be whether manufacturers can bring affordable EVs to market in order to appeal to the masses. Due to China’s extensive experience and firm grip on much of the lithium-ion battery supply chain, this has been a difficult challenge for many in recent times as they look to move away from Chinese material. In addition, to combat high EV prices, automakers are turning towards iron-based chemistries as a way to unlock lower production costs for entry-level EVs and to attract customers at scale. For China, this has ben a mainstay for a number of years. For Japan, this poses more of a challenge, as the country has historically favoured nickel-based chemistries, which command a premium both at the material and vehicle level. This is not to say that low-cost EVs are unattainable unless LFP is used, it is just much harder to achieve lower costs of production if the price of batteries is high. These two titans of the automotive sector will therefore have to plan strategically and act quickly if they are to compete in this fiercely competitive landscape.

Questions may be raised about the extent of the commitment between the two in the non-binding MoU, but it clearly demonstrates a need to collaborate in order to gain ground in the new world of EVs. Delays to the ramp up of low-cost EV production will only play into the hands of China’s growing empire.