Japanese auto giants Nissan and Honda said Friday they had agreed to explore a strategic partnership in electric vehicles and other areas.
Analysts said the move was aimed at catching up with Chinese rivals who have stolen a march in EVs while Japanese firms have lost ground by focusing more on hybrid vehicles.
"To further accelerate efforts toward carbon neutrality and zero traffic-accident fatalities, it will be essential to strengthen environmental and electrification technologies as well as software development," a joint statement said.
"The two companies have reached the understanding based on the belief that it is necessary to combine their strengths and explore the possibility of future collaboration," it added.
The scope of the feasibility study includes automotive software platforms, core components related to EVs, and complementary products, they said.
"We are not competing only with the traditional car makers, but also with new players. These emerging brands with innovative products and new business models are making inroads into the auto market and are trying to gain dominance by capitalising on their overwhelming price competitiveness and amazing speed," Nissan chief executive Makoto Uchida told reporters.
"We cannot win the competition as long as we stick to conventional wisdom and traditional approach," he said.
Honda director Toshihiro Mibe said that there was a "once-in-a-century transformation in the automotive industry".
"Our study criteria will be whether the synergy of the technologies and knowledge that our companies have cultivated will enable us to become industry leaders by creating new value for the automotive industry," he said.
Hybrids combine battery power and internal combustion engines and have proven enduringly popular in Japan, accounting for 40 percent of sales in 2022.
But elsewhere Japanese firms' focus on hybrids has meant that they have been left in the slow lane in meeting the growing appetite for purely electric-powered vehicles.
In 2022, just 1.7 percent of cars sold in Japan were electric in 2022, a far cry from around 15 percent in western Europe and 5.3 percent in the United States.
EVs accounted for as much as 20 percent of new cars sold in China in 2022, and the strength of Chinese auto firms helped the country overtake Japan as the world's biggest auto exporter last year.
Honda and Nissan are even considering cutting production capacity in China as sales decline, according to media reports.
"Both of the companies are not at a high-enough scale to create enough profit margins... so they are actually under pressure to find a partnership," said Chris Redl, an auto analyst in Japan.
"Even though they were very fierce rivals historically, it makes more sense for Nissan to get together with a Japanese company like Honda, rather than having these cultural wars with an alliance partner like Renault" of France, he said.
