Sony and Honda’s EV venture is a lesson for Japanese companies

Somewhere in the ether between their headquarters in Tokyo, a heated debate must now erupt between two of Japan’s biggest companies. If their planned joint venture succeeds in creating an electric vehicle champion to challenge Tesla, should the new power couple be called Sonda or Hony?

Either way, the announcement last Friday that Sony and Honda were joining forces to produce electric vehicles sounds like a lot more than a standard strategic alliance. Important precedents were created and important risks were taken. Whatever its outcome and cost, it’s the kind of experiment Japan needs most in the long run: a pooling of resources with a tacit admission that no one works in automobiles or electronics. mainstream in the industry he thought he was.

Some analysts have downplayed the surprise factor of the union and the magnitude of the likely benefits for both companies. At the Consumer Electronics Show in Las Vegas in January, Sony showed off prototypes of its Vision-S and Vision-S 02 and formed a new EV subsidiary, but stressed it was not looking to build cars itself. Honda, meanwhile, seemed exposed by its lack of a clear EV strategy in an industry where it’s the trillion-dollar story. Two companies that need partners, so in this respect a comfortable couple.

At the same time, say analysts at Pelham Smithers Associates, the logic is shaky in places. Prior to the joint venture, Sony’s EV business could be seen as a showcase of in-vehicle electronics (gaming systems, music systems, displays, etc.) for the market as a whole.

By partnering with Honda, and despite strong claims to the contrary, Sony has likely given up on the idea of ​​selling its automotive electronics capabilities to the wider industry. The threat for Honda, meanwhile, is that it ends up playing the role of mere assembler for Sony – a role no confident global player wants, which is why Apple has yet to find a builder. high-end automobile ready to team up with this.

But despite all these caveats, several elements of the Sony-Honda business stand out as benchmarks for Japanese companies. The first is the extent to which Honda’s willingness to enter this partnership can be interpreted as an admission of its shortcomings – not as a hardware craftsman, at which it remains excellent, but as a software master. For Honda and other automakers, one of the hardest lessons Tesla taught was the success of a vehicle built largely around its user-facing software.

Versions of this problem have long plagued Japanese companies: the relentless rise of the software platform as the defining feature of consumer electronics has revealed a huge area of ​​vulnerability. Sony, when evaluated against Apple, may not look like it beats the world on this front, but, as a developer of consumer platforms (especially the PlayStation), it is probably the best in Japan. Other Japanese companies would be wise to understand the psychological leap Honda has made.

A second precedent is set by the history of these two particular companies, a duo that, for many reasons, is an example of both entrepreneurial vehemence and rebellion.

At the press conference to announce the joint venture and highlight the cultural fit, a slide juxtaposed photos of the two Sony founders with the two Honda founders looking like the bespectacled visionaries they were. Their smiles, meanwhile, masked a pugnacious disregard for authority. In their early days, the two companies had transformative tussles with Japan’s manipulative Ministry of Commerce (which tried to stop Honda from making cars and Sony from receiving the license to produce transistors) and were forever set in challenging him.

The two companies have satisfactorily concluded their partnership without the involvement of the Ministry of Commerce. More importantly, they did so despite their fiercely cherished independence. As such, this partnership recognizes how both companies have been forced to reevaluate their priorities and implicitly recommends that other companies do the same.

The CEOs of Honda and Sony said a public listing of the joint venture was something they would consider. But for the sake of a Japanese company that needs positive indicators and investors that need a narrative, it should be seen as actively desirable.

This is a market that increasingly needs large pure tech companies. A publicly traded Hony or Sonda can never command more than a fraction of Tesla’s market capitalization. But its stock price would be a vital clue as to how, with a little creativity, Japan could attach much higher valuations to its greatest treasures.

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