New Delhi: The recent joint announcement by Honda and Nissan to explore working together marks yet another step forward in the consolidation of Japan’s auto industry.
According to industry sources, it is a clear acknowledgement of today’s global realities where the Chinese are forging ahead in the electric vehicle arena. “Japan has been a laggard in comparison and this move by Honda and Nissan to team up for electrification is proof of this fact,” says an auto sector official.
In his view, forming deep relationships is the only way out for automakers to stay afloat in this competitive era of manufacturing EVs, more so when they are up against a formidable opponent like China. The country has already signalled its intent to ship out its range to a host of countries in South America and ASEAN with Europe and the UK also on its radar.
The killer combination of top-end features and an affordable price tag are enough to draw buyers from across the world to Chinese EVs. It is precisely for this reason that Europe is already under pressure from its carmakers to impose tariffs on EVs imported from China with the US likely to follow suit for Chinese car brands that could be shipped out from their facilities in Mexico.
Japan vs. China
In this backdrop, it is now getting increasingly apparent that Japan’s dominant position in the automobile industry is under even greater pressure thanks to the EV blitzkrieg emanating from China. Sure, Toyota continues to be the world’s largest carmaker but going solo is not the answer if it means standing up to the challenges of tomorrow.
This also puts in context why Toyota has been at the forefront in sewing up some key alliances as part of the effort to stay ahead of the race. In 2017, it announced a partnership with Suzuki Motor Corporation with an eye on India and other emerging markets like Africa and Latin America. Suzuki is the market leader in India and Toyota has not been able to make much of a dent there except for one successful brand in the form of Innova.
However, over the past six years since this alliance came into being, both the companies have been collaborating on key areas like product development and ushering in cleaner fuel options for the Indian market. There could be some even bigger developments in the near future like global products and other technological breakthroughs which will put the Toyota-Suzuki partnership on a strong wicket.
Toyota also has a stake in another Japanese brand, Mazda, where the idea is to grow in North America which is clearly among its most important markets. Then there is Daihatsu, another Toyota group company, whose prowess will be leveraged for the ASEAN region.
Renault alliance
In the case of Honda and Nissan, it is still not clear how this will pan out in terms of a strategic roadmap. The latter has had a strong partnership of over two decades with Renault of France even while the structure has changed in recent times with Nissan now having a greater say than in the past.
Honda had entered into an agreement with General Motors to produce electric vehicles but the two called it off last October since it did not look too viable. Perhaps this prompted the Japanese carmaker to join hands with Nissan and, in the process, take the consolidation script in Japan to the next level. It perhaps needs to be mentioned here that Nissan also has a stake in Mitsubishi, acquired in 2016 when the latter was literally down and out.
Incidentally, there was a time when the Japanese automakers like Suzuki were in global partnerships which were working quite well. The alliance with GM, for instance, was coming along nicely till the two decided to call it quits and the next big ticket brand Suzuki opted for was Volkswagen where the script just went horribly wrong.
The parting of ways was not pleasant and it was at this point in time that Toyota stepped into the picture. The alliance has had no glitches thus far and this is also owing to the fact that there is a greater level of cultural convergence and mutual respect among Japanese companies.
Case for unity
Nissan and Renault also had a successful relationship even though it was not exactly on even terms. This is what raised the former’s hackles which then led to a series of dramatic developments starting with the arrest of Carlos Ghosn, Chairman of Renault-Nissan, followed by more upheavals at the leadership level and finally a restructuring of the alliance.
With Honda now as its partner for EVs, there will be obvious questions on the relevance of the Renault partnership going forward. Will Honda also play a role here along with Mitsubishi? These are early days yet to seek answers but, from the viewpoint of Japan’s auto industry, the pragmatic solution is that in unity lies strength.
A section of industry observers believes that the Japanese government has been pushing for greater consolidation among its automakers’ fraternity since this is the only way to stand up now competition emerging in the form of the Chinese. Even in the two-wheeler arena, Honda and Yamaha which were bitter foes for decades teamed up in 2016 for joint development of 50cc scooters which is a niche segment in Japan.
While this may not have seemed too significant, it still marked a beginning in building new bonds between two erstwhile rivals who had little love lost for each other during the fierce days of the ‘H-Y’ war in the early 1980s.
Burying the hatchet
The global CEO of Yamaha then, Hiroyuki Yanagi, had told this writer during a visit to India, “All this happened over 30 years ago. That was during the old generation management but we represent a new generation that thinks differently.”
Apart from working together in the 50cc scooter space, the two companies were tipped to explore the possibility of collaborating in electric motorcycles and in areas relating to range, charging time, performance and cost. Yanagi said electric bikes represented an important mobility initiative for the future.
“However, in the case of e-motorcycles, there are technological difficulties compared to four-wheelers. We will try and make a good alliance with Honda as each of us has some know-how in this space. If we can put that together, there will be better technology in the process,” he said.
Since then, nothing much has really come about in terms of joint product development from Honda and Yamaha but, as industry observers say, there is no telling what the future has in store. In any case, there is already a two-wheeler battery consortium in Japan comprising Honda, Yamaha, Kawasaki and Suzuki which may well build up to something bigger globally.
