Facing major changes in the external environment, the traditional Japanese automaker 'Big Three' landscape has shifted, consolidating into two main players. This heralds a more differentiated and complex competitive landscape in the future Japanese automobile market.

"We need to abandon past development concepts and quickly embrace our competitors."

On August 1, Honda Motor President Minoru Ito made the above statement at a joint press conference with Nissan and Mitsubishi. Although Japanese media had been notified the previous day that Honda and Nissan would announce further cooperation based on the strategic cooperation memorandum of understanding (MOU) signed in March, the "double" announcement on that day was still surprising.

On one hand, there is the established Honda-Nissan cooperation announcement: the two parties will further deepen the framework of their strategic partnership, signing an MOU on deepening their strategic partnership and engaging in extensive discussions and reviews. It is reported that to promote and develop electric vehicles, the two parties have reached a joint research agreement on the basic element technologies in the field of next-generation software-defined vehicle (SDV) platforms, covering technologies such as batteries and electric vehicle drive units (E-Axle). The unexpected aspect is that Mitsubishi has joined the MOU cooperation framework of the first two parties, agreeing to cooperate in software, batteries, and other electric vehicle-related technologies to save development costs.

Of course, Mitsubishi's joining the Nissan-Honda cooperation camp seems to be a natural development. As a member of the Renault-Nissan-Mitsubishi Alliance, it is now closely associated with Nissan and holds approximately 34% of the latter's shares.

Subsequent analysis pointed out that Mitsubishi's joining the Honda-Nissan alliance indicates that under the wave of electrification and intelligence, the trend of Japanese automakers accelerating their grouping is becoming more prominent. Considering the other side, Toyota has formed a new "Internal Combustion Engine Alliance" with Mazda, Subaru, etc., and signed cooperation agreements with Suzuki, Daihatsu, etc. Since then, the traditional Japanese automaker 'Big Three' landscape has changed, entering a new era of development with two main camps.

"Big Three" shifts to "Dual-Powerhouse"

According to Japanese automakers' sales figures for fiscal year 2023 (ending March 2024), Honda sold 4.07 million vehicles globally, Nissan sold 3.44 million, and Mitsubishi sold 810,000. The union of these three parties represents the emergence of an alliance prototype with a total volume of 8.33 million vehicles. As for the Toyota camp, using the same sales volume metrics, Toyota's capital "alliance" with Suzuki, Mazda, Daihatsu, and Subaru reached a fiscal year sales volume of 16.63 million vehicles.

From a specific perspective on areas of cooperation, Honda and Nissan are expected to transition from technology integration to technology homology. In the software domain, the two parties have agreed to jointly research software technology, planning to complete early basic research within a year and launch the next-generation software by 2030. In terms of in-vehicle batteries, Honda is considering supplying batteries produced by itself and LG-affiliated companies to Nissan in North America after 2028. Additionally, the two parties will collaborate on the research and development of core drive units for electric vehicles and consider complementing each other's product lines for gasoline and electric vehicle models, jointly promoting the construction and services of charging infrastructure.

Nissan Motor President Makoto Uchida stated that these measures are expected to alleviate the burden of heavy investment for both parties. "Japanese automakers have always prioritized procurement from existing supply chains of components. Honda and Nissan will seek to break through the barriers of the existing system and promote supply chain construction."

Although Mitsubishi, which suddenly joined, stated that it would subsequently confirm the details of cooperation content with Honda-Nissan, it also plans to achieve commonality in the field of in-vehicle software among the three automakers. The operating system (OS) being jointly developed by Nissan and Honda will also be considered for use in Mitsubishi vehicles. Mitsubishi believes that although automotive software is crucial for the competitiveness of next-generation products, development costs are high. By joining the alliance, it will introduce high-performance technology while reducing costs, allowing existing operating resources to be shifted to other areas of electrification. At the same time, Mitsubishi is also considering product complementarity. It is reported that Honda does not produce plug-in hybrid products or pickup trucks in Japan. In the future, Mitsubishi, which has advantages in these areas, will provide Honda with OEM production and explore more product complementarity cooperation in the light vehicle sector.

Some believe that the union of Honda, Nissan, and Mitsubishi is a move by the Japanese government to strengthen the domestic automobile industry after China became the world's largest automobile exporter. Macquarie Securities analyst James Hong stated, "This is coordinated by the government with the aim of building a competitive automobile manufacturing industry." He also pointed out that Honda and Nissan's unfavorable competition in the Chinese market contributed to this union. It is worth mentioning that as Nissan and Mitsubishi chose to rejoin forces with Honda, the original alliance functions with French Renault were weakened.

As for the Toyota camp, since the announcement of the establishment of the "Internal Combustion Engine Alliance" in May this year, the alliance is accelerating the search for a transition path between electrification and maintaining the status quo to maintain sales focus and "profit cows" for gasoline and hybrid vehicles. Toyota and others believe that future automotive internal combustion engines will exist in the form of zero-carbon hybrid-specific engines, and will therefore continue to develop their respective "representative" power systems, including Subaru's horizontally opposed engines, Toyota's inline four-cylinder engines, and Mazda's rotary engines. For the next-generation engines, these three companies will not only seek to improve the performance of individual engines but also leverage their respective advantages to optimize their integration with electric drive units. At the same time, the three parties have also indicated cooperation in the following areas: sharing technical information and R&D resources to reduce costs and improve efficiency; jointly formulating carbon emission standards for internal combustion engines and promoting the industrialization of related technologies; and jointly developing carbon-neutral fuels to provide sustainable solutions for the future development of internal combustion engines.

The inevitable path under external pressure

Previously, in addition to the North American market, Japanese automakers focused their investment on the Chinese market, occupying a significant share through expanded capacity and network coverage, leveraging advantages such as high resale value, fuel economy, and low energy consumption. However, with the unexpected development of China's new energy vehicle market and the emergence of local brand advantages, Japanese automakers have faced greater challenges due to their sluggish electrification and intelligence transformation, especially their persistence in traditional hybrid and hydrogen-powered vehicles. Since 2023, the intensifying price war has further weakened the competitive advantage of Japanese brands in the gasoline vehicle market, with price floors continuously being broken, pushing the prices of mid-sized sedans into the range of compact vehicles from joint ventures.

At the same time, as Japanese automakers face overall sales pressure in China, their capacity utilization rates are also declining. In June, Nissan announced the closure of its Changzhou factory in China, which had an annual capacity of approximately 130,000 vehicles, accounting for about 10% of Nissan's total production in China. In July, Honda planned to close two vehicle assembly plants in China: Guangzhou Honda plans to shut down its fourth production line with an annual capacity of 50,000 vehicles in October this year, while Dongfeng Honda plans to halt production at its second production line with an annual capacity of 240,000 vehicles in November. After adjustments, Honda's total automobile production capacity in China will decrease from 1.49 million to 1.2 million vehicles. Recent reports suggest that Honda plans to further reduce its annual automobile production capacity in China by 200,000 vehicles and is currently coordinating this reduction.

The Nikkei commented that although the stagnation of Japanese electric vehicle development has "begun to affect its international competitiveness," consolidating into two camps is expected to "inject new vitality into the electric vehicle business." As change becomes the general trend, Japanese automakers are accelerating their electrification transformation, making up for intelligence shortcomings, and strengthening localized research and development, aiming to lay a solid foundation for finding new growth curves through broader integration. Note: This article was originally published in the "Global Vision" section of the September 2024 issue of "Auto Industry Observer" magazine. Please stay tuned.

Images: From the Internet

Article: Auto Industry Observer

Typesetting: Auto Industry Observer