Toyota, Honda, and Nissan, three of Japan’s biggest automakers, are reportedly in talks to collaborate on developing in-car software. The manufacturers have stated that they are looking at collaborating on basic elements of the software code such as application programming interface (API) to overcome obstacles in the installation of components like batteries and sensors. The automakers have expressed their belief that the collaboration would make it easier for third-party firms to develop services compatible with the code, much in the same way that smartphone apps have evolved. The collaboration is expected to make it easier for Toyota, Honda, and Nissan to compete with their Chinese and US rivals as digitization continues to expand in the automotive sector. The Japanese government has also been supportive of digital technology initiatives in the automotive sector in recent times, unveiling subsidies worth $2.4 billion late last year aimed at promoting the development of technologies for next-generation electric vehicles.
The Japanese automakers are reportedly looking to initiate their new partnership from fiscal 2025 or later and may expand the collaboration to other domestic manufacturers like Mazda, Suzuki, and Subaru.
Software plays a significant role in modern automobiles, from basic functions such as braking and steering control, to advanced features such as autonomous or semi-autonomous driving. Because of this, competitivity in the sector has been based on developing high-quality software. While there is consensus among the automakers on the need for collaboration in software development, issues such as the selection of new specifications could present significant hurdles. However, this could be overcome through closer dialogue between automakers when introducing new software standards.
Outside of Japan, the automotive sector has witnessed a significant push for software collaboration and standardization over the past two years. In China, for instance, state-sponsored technology developer the China Automotive Technology and Research Center (CATARC) has worked with local smartphone manufacturers in devising automobile standards for connectivity.
Meanwhile, Tesla, one of the US’ main electric vehicle manufacturers, has been collaborating with third-party software developers to provide additional functionality to its software system. Third-party support adds value to the customer experience by enabling features such as entertainment, navigation and weather detection.
As part of the recently announced digital strategy for automobiles, experts have called for the Japanese government to strengthen its support and investment in software development initiatives in the automotive sector. This is seen as critical to gaining a competitive edge in the global electric vehicle market, where software innovation remains a key differentiator.
Kohei Morita, an analyst at the Mitsubishi UFJ Morgan Stanley in Tokyo, recently stated that hardware such as engines and battery cells will likely become commoditized in the years to come. Instead, software development will be the source of significant competitive distinction between firms. Morita also stated that electric vehicle manufacturers will require software investment in fields such as battery management and electric powertrains to compete effectively.
The COVID-19 pandemic has propelled the automotive sector toward widespread digitization. The past year has seen automotive firms place a greater emphasis on remote monitoring and management systems, linked to artificial intelligence-powered analysis to maintain social distancing protocols while still ensuring operational efficiency.
This move by the Japanese automakers comes as the world’s major automakers, including Mercedes-Benz owner Daimler and China’s Baidu, have been deepening partnerships to boost their technology portfolios.
