Sources familiar with the matter said on Sunday that Mitsubishi was in talks to join the Nissan-Honda alliance to play catch-up with foreign rivals in developing electric vehicles and advanced technology for next-generation vehicles. The deal has now been officialized. Former Nissan boss Carlos Ghosn says this is a ‘disguised take-over’ by Honda.

The three Japanese automakers are considering teaming up to standardize in-vehicle software but also for other joint operations. “Cooperation with partners is essential in today’s automotive industry, where changes occur swiftly due to technological innovations like electrification,” said Mitsubishi Motors President Takao Kato in a joint press release.

The car industry undergoes a transformation that only happens once a century,” underlined Toshihiro Mibe, Honda’s CEO. We hope that the combination of technologies and knowledge cultivated by Nissan, Honda, and Mitsubishi Motors’ strength and experience will allow us to solve worldwide electrification problems quicker and more effectively.”

Two major Japanese groups

As Toyota Motor Corp. expands its tie-ups with other local peers to develop vehicle electrification technology, the Honda-Nissan-Mitsubishi alliance will create two major groups in the Japanese auto industry.

Honda and Nissan said in March that they would consider cooperation in the EV segment. Mitsubishi is part of the three-way alliance with Renault SA and Nissan, which holds a 34.01% stake in Mitsubishi Motors.

Toyota is partnering with Suzuki, Mazda, and Subaru to develop electrification technology. The global auto industry is shifting to more connected, autonomous, shared, electric, or CASE vehicles, but it is tough for a carmaker to cover all the technologies alone.

Software and AI

The EV market is currently led by China’s BYD Co. and America’s Tesla Inc., with little presence of Japanese brands. With tech companies such as Sony Group Corp. and Google parent Alphabet Inc. joining the auto market, software, and artificial intelligence are integral to competitive advantage.

Honda recently decided to cut back production capacity for gasoline-powered vehicles in China, as demand for EVs is growing in the world’s largest auto market. Honda is closing a plant in China to produce combustion vehicles and is pausing production at another factory.

Instead, the Japanese car manufacturer plans to open two new EV factories in China. Nissan is also introducing new EV models to jump-start sluggish sales.

The two carmakers are discussing joint development of core components, such as drive units, batteries, and in-vehicle software, to cut hefty development costs. Now, Mitsubishi will join the ball.

They want to harmonize battery specifications and proceed with logistic synergies like “autonomous drive, connectivity, and AI, which will determine the value of vehicles in the future and become an important source of competition”.

Toyota plans to increase global EV sales to 3.5 million vehicles by 2030 with an investment of 5 trillion yen (€30 billion). At the same time, it wants to stay number one in hybrid drive to provide the rest of the world with cars where fully electric ones aren’t a solution yet.

Comments of Carlos Ghosn

Carlos Ghosn, who led Nissan through nearly two decades of productive partnership with Renault, says the success of a new three-way tie-up among Nissan, Mitsubishi, and Honda will be easier said than done.

“Signing an alliance is the easy part. Now, making the alliance work is a completely different story,” Ghosn told Automotive News from Lebanon, where he lives as a fugitive from Japanese authorities after jumping bail in December 2019 and fleeing the country hidden in a box.

Ghosn said that is partly because Honda is the strongest of the three by far. As it struggled with sustaining global sales volume growth, Nissan saw ballooning US incentives nearly completely erasing its profit in the April-June quarter. The company posted a 4.1% increase in global sales to 3.4 million in the fiscal year ended March 31.

Since rebalancing the alliance with Renault last year to gain independence, Nissan has resembled a company “trying to find a savior,” Ghosn said. “Signing an agreement with Honda looks like an initiative to turn attention away from the miserable results.”

“I can’t imagine for one moment how it’s going to work between Honda and Nissan unless it’s a take-over unless it’s a disguised take-over by Honda of Nissan and Mitsubishi with Honda in the driver’s seat,” Ghosn said. “It’s going to be a take-over, a disguised take-over.”

“Saying they will work together is just five percent of the challenge. The other 95 percent of the areas are where you need to sit down, have a strong position, and have a repartition of the work,” Ghosn explained.

“You need to work on synergies. You need to ensure you’re not fixated on your identity or national belonging. You need to look at your bottom line, at increasing your revenues, cutting your costs.”