By Maki Shiraki
TOKYO (Reuters) – Nissan (OTC:) Motor is contemplating seeking a business partnership with Honda (NYSE:) Motor on key components for electric vehicles to reduce production costs, three individuals familiar with the matter at Nissan stated.
The potential partnership with domestic rival Honda will assist Nissan in acquiring scale, which is crucial for Japanese automakers as they confront intense competition from China’s BYD (SZ:), Tesla (NASDAQ:) and other electric vehicle manufacturers.
The sources, who declined to be identified as the matter is still private, mentioned that Nissan and Honda are yet to formally initiate discussions, with the extent of the partnership undecided.
Another source mentioned that the concept of collaboration arose between the chief executives of the companies.
Nissan is mulling over partnering with Honda on key EV parts, as well “kei car” – compact vehicles that are smaller and less powerful than regular cars, primarily designed for the domestic market.
The partnership could potentially expand to overseas operations, but that would impact Honda’s existing collaboration with General Motors (NYSE:), according to two of the sources.
Nissan’s pursuit of a partnership was first reported by TV Tokyo. A Nissan spokesperson declined to comment. A Honda spokesperson mentioned there was nothing the company could say.
A source at Honda mentioned a potential partnership with Nissan is one of various options the company is considering, but there are many agenda that need to be sorted out for it to proceed with a new tie-up.
Honda is aiming to increase its ratio of electric vehicles and fuel cell vehicles to 100% of all sales by 2040.
Nissan already collaborates with Renault (EPA:) on EVs, mainly in Europe. The upcoming Nissan electric Micra will share the same architecture as the new Renault Five and be manufactured in the same facility in northern France.
Nissan has also committed to invest up to 600 million euros ($652.50 million) in Renault’s new electric vehicle entity Ampere.
But the two firms last year reduced the scope of a years-long alliance to allow for a more flexible partnership, and Renault has since signed agreements with new partners such as China’s Geely.
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