Honda and Nissan, which abandoned plans for a management integration last year, have agreed to jointly develop the "brain" of next-generation vehicles. This marks the first concrete outcome after 2.5 years of discussions that began in 2024. With competitors like Tesla and Chinese electric vehicle manufacturers advancing in enhancing vehicle performance through software, both companies felt a sense of urgency to compromise rather than risk falling further behind by sticking to independent paths.
According to the Nihon Keizai Shimbun (Nikkei), Honda and Nissan announced on August 31 that they have signed a contract for the joint development of key components and basic software for software-defined vehicles (SDVs). The collaboration will include the development of a core electronic control unit (ECU) that integrates control of the entire vehicle, as well as the vehicle operating system (OS) and control software. The developed components and software are planned to be incorporated into new vehicles released by both companies after 2029.
SDVs are vehicles that can receive software updates via communication after delivery, improving driving assistance features or adding entertainment functionalities. In traditional vehicles, separate ECUs control functions like the engine, brakes, and transmission, but SDVs will integrate these functions under a core ECU and vehicle OS. This shift means that software will play as crucial a role as hardware in determining vehicle performance and marketability.
Despite the growing importance of SDVs in the automotive competition, it took 2.5 years for the two companies to reach an agreement. They began discussions in March 2024 and agreed in August of the same year to collaborate in five areas, including SDVs and battery supply. In December, they entered negotiations for management integration, but Honda's proposal to make Nissan a subsidiary led to Nissan's objections, resulting in the breakdown of talks in February of last year. Subsequently, both companies shifted their focus from management integration to sector-specific collaboration.
The late decision to pursue joint development stems from the need to prevent widening the gap with leading companies in the rapidly growing SDV market. According to the Japan Electronics and Information Technology Industries Association (JEITA), SDVs are expected to account for 67% of global vehicle production by 2035. As Tesla and emerging Chinese automakers lead development, Toyota also launched its first full-fledged SDV model, the new RAV4, last year.
High development costs have made it difficult to maintain independent paths. Last year, Honda and Nissan sold 3.52 million and 3.2 million vehicles globally, respectively, nearly ranking them third in the world combined. Mitsubishi Motors, in which Nissan holds a stake, is also considering joining the joint development. The Asahi Shimbun noted that a coalition of Honda, Nissan, and Mitsubishi is emerging as a counterforce against the Toyota-led alliance that includes Suzuki. The combined sales of the three companies, including Mitsubishi, are expected to reach about 7.3 million units in the 2025 fiscal year. The more vehicles that incorporate jointly developed components, the lower the development costs per vehicle, and the greater the variety and volume of data collected from the vehicles.
However, the two companies are still at odds over the leadership of SDV technology. According to the Asahi Shimbun, Honda envisioned an OS that integrates control of the entire vehicle, while Nissan proposed a limited-functionality specification. Honda has been developing its own OS, "Asimo OS," while Nissan has been working on an SDV platform that includes data infrastructure and development environment for its vehicle OS. Nissan plans to commercialize this platform by 2026. Adopting one company's technology would require the other to abandon its ongoing independent development.
Ultimately, Honda's revision of its vehicle OS strategy opened the door for negotiations. Honda announced it would reconsider its strategy of broadly applying Asimo OS. The core ECU and vehicle OS will be developed jointly, utilizing some of the technology already developed by Nissan while incorporating Honda's technology.
However, technologies directly linked to vehicle individuality and market competitiveness, such as autonomous driving, will continue to be developed separately for the time being. Honda will continue its independent development, while Nissan will utilize technology from the UK startup Wave Technologies. Mapping and entertainment applications will also be developed independently by each company. While they have joined forces on a common foundation to reduce costs, they have not merged the technologies that determine the distinctiveness of their finished vehicles.
Conflicts still linger. The two companies initially aimed to announce their agreement in July, but negotiations were prolonged over the usage fees for Nissan's developed technology and intellectual property rights ownership. A Nissan executive expressed to the Yomiuri Shimbun, "It is difficult to handle intellectual property rights in a cooperation without capital ties." Despite announcing a significant agreement, they did not hold a joint press conference. Of the five areas of cooperation proposed in 2024, only the SDV has led to an actual contract so far.
While the two companies spent 2.5 years negotiating, American and Chinese firms have widened the technological gap. An analyst expressed skepticism to the Asahi Shimbun, stating that even starting joint development now would make it difficult to catch up. Conversely, Takaki Nakaniishi, a representative analyst at Nakaniishi Automotive Industry Research, told the Yomiuri Shimbun, "To secure competitiveness in SDVs, scaling up is essential, so it is a wise decision for Japan's major manufacturers to join forces."
What is clear is that merely reducing costs will not allow them to catch up with the leaders. The success of this collaboration will hinge on how smoothly they can integrate independently developed technologies, such as autonomous driving, onto a common foundation to create vehicles that consumers will choose.
* This article has been translated by AI.
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