Summary of Key Points
After the failed merger plans between Honda and Nissan in 2025, the two companies have officially announced the restart of their collaboration, focusing on the "Software-Defined Vehicles (SDV)" initiative. They aim to jointly develop standardized electronic control units (ECUs) and in-vehicle operating systems, with plans to implement these technologies in their new vehicles by the 2029 fiscal year. Essentially, these two struggling Japanese automakers are seeking a new approach to reduce costs and increase efficiency in order to compete with the intelligent vehicles from Chinese manufacturers.
What Exactly Is the Cooperation About? —— Establishing Unified Standards for the Next Generation of Smart Cars
The core of this collaboration is standardization. The goal is to create uniform technical specifications for critical electronic components in cars, such as ECUs (which act as the "mini-computers" controlling engine, braking, and intelligent driving functions), in-vehicle operating systems (similar to smartphone operating systems), middleware (the bridge between hardware and software), and the software that controls the entire vehicle.
In simple terms, Honda and Nissan used to develop these components separately. Now, they are working together to establish common standards—for example, the interfaces of ECUs and the code logic of the software will be consistent. This will allow them to share technology and supply chains, eliminating the need to reinvent the wheel when developing new vehicles, thus saving time and reducing costs. The standardized components are scheduled to be used in their SDV models by 2029. SDV refers to vehicles where functions like intelligent driving and entertainment systems are primarily upgraded through software, rather than relying on hardware upgrades.
Why Did the Merger Fail and They Choose to Collaborate Instead? —— A Compromise from "Going It Alone" to "Working Together"
The two companies nearly merged at the end of 2024 and even considered bringing Mitsubishi into the deal to form the world's third-largest automotive group, but the plans fell through in February 2025. The reason was straightforward: Honda wanted to make Nissan a 100% subsidiary, which Nissan refused, leading to the breakdown of the negotiations.
The reason for the current collaboration is that both companies are facing tough times. A merger didn't work out, and pursuing SDV on their own is too costly due to the high investment required for software development in smart vehicles. Both parties recognize the need to "shorten development cycles and improve investment efficiency," which essentially boils down to saving money and producing results more quickly.
External Pressure: The Role of Chinese Automakers in Driving This Cooperation
The global automotive market has changed significantly. Japanese cars used to rely on their reliability and fuel efficiency, but now electric and intelligent vehicles are becoming the mainstream, with Chinese manufacturers posing a significant challenge. Statistics show that in the first half of 2026, BYD sold 1.8 million vehicles globally, surpassing Honda (1.66 million) and Nissan (1.5 million). Other Chinese manufacturers like Geely and Chery are also making rapid progress. Although European and American automakers (such as General Motors and Stellantis) still lead in sales, Japan's traditional advantages are no longer effective—what used to be strengths (such as a large number of gasoline vehicle production lines) have become burdens in the transition to electric vehicles.
Internal Challenges: Both Companies Are Struggling
Honda has experienced its first annual loss in 70 years, with sales declining by 7.5% globally last year and another 6.5% in the first half of this year. Its transition to smart vehicles has been slow, failing to keep up with the pace of Chinese manufacturers.
Nissan's situation is even worse; it has dropped out of the top 10 global automakers, with sales continuously declining. To cut costs, it sold its headquarters building, laid off employees, and implemented the "Re:Nissan" cost reduction plan, lowering its sales forecast for the 2026 fiscal year from 3.3 million to 3.15 million vehicles (a 4.5% decrease). With insufficient funds and lagging in technology development, Nissan has no choice but to cooperate with Honda.
Can This Cooperation Save Them? —— A "Last Attempt" by Japanese Automakers?
This is the first time Japanese automakers have collaborated in the SDV field, representing a crucial step towards mutual support. The benefits include reduced duplication of investments; for example, the software developed together can be shared, and bulk purchases of ECUs can result in lower costs and improved competitiveness. However, there are risks. The two companies had previous conflicts over the merger, and it's uncertain whether they can work smoothly together. Given that software is at the heart of SDV, Japanese automakers (such as Honda and Nissan) are at a disadvantage compared to Chinese manufacturers like BYD with its DiLink system and Tesla with its FSD). Whether they can catch up remains to be seen.
In summary, this collaboration is a last-ditch effort by Japanese automakers to stay competitive in the face of challenges from Chinese manufacturers in the smart vehicle market. If it fails, their market share could be further eroded by Chinese competitors.