In an effort to boost their presence in the electric vehicle (EV) market and take on competitors such as Tesla and BYD, Japanese automakers Honda and Nissan have initiated talks of a potential partnership for EV development. With the demand for EVs slowing down, both Honda and Nissan are aiming to cut costs and enhance their competitiveness on a global scale.

On Friday, Honda and Nissan announced that they have agreed to conduct a feasibility study on an EV production collaboration. According to J.D. Power data, neither company ranked among the top 25 plug-in EV producers in 2023. In contrast, BYD and Tesla secured the first and second positions respectively in terms of the number of EVs sold.

Early discussions between Honda and Nissan revolve around joint procurement and the development of components, including batteries. Nissan, which has been considered an EV pioneer since launching its compact Leaf car in 2010, aims to leverage its expertise to gain an edge in the partnership.

Following the news, Honda's stock experienced a 2.4% increase to reach $36.09, while Nissan's stock rose by 3.4%. Tesla's stock, on the other hand, made a marginal gain of 0.6% to settle at $163.56. BYD's shares also climbed by 0.8% to reach $26.85.

The decision by Honda and Nissan to explore a partnership comes at a time when U.S. automakers Ford and General Motors have scaled back their EV plans. Toyota's Chief Executive, Ted Ogawa, stated in an interview that his company will continue to focus on hybrid vehicles and will prioritize buying credits rather than investing heavily in battery electric vehicles.

During a news conference, Honda President Toshihiro Mibe emphasized the need to adapt to the rapidly changing industry landscape, stating, "We can no longer fight in the existing framework." Nissan's Chief Executive, Makoto Uchida, emphasized the dominance emerging EV companies are trying to achieve through price competitiveness and speed, acknowledging the necessity for collaborations.

Analysts have noted a slowdown in global EV sales due to weakening demand and increased competition. Tesla, in particular, is projected to miss its Q1 delivery estimates, leading to revisions by several analysts. Tesla CEO Elon Musk has identified Chinese EV companies as the company's primary competition. BYD, Nio, Li Auto, and others are making significant progress in the EV market. In fact, BYD surpassed Tesla in global battery electric vehicle deliveries in Q4 2023, solidifying its standing as a formidable competitor. BYD's decision to establish a manufacturing plant in Europe further intensifies the competition with Tesla in new territories.

The potential partnership between Honda and Nissan signifies their determination to keep up with the shifting dynamics of the EV industry and challenge key players like Tesla and BYD. By leveraging their combined expertise, the Japanese automakers aim to strengthen their market presence, develop cutting-edge technologies, and meet the evolving demands for electrified transportation.