Somewhere in the ether between their Tokyo headquarters, a heated debate must now be raging between two of Japan’s largest companies. If their proposed joint venture succeeds in creating an electric vehicle champion that will challenge Tesla, should the new power couple be known as Sonda or Hony?
Either way, last Friday’s announcement that Sony and Honda joined forces Electric vehicle production looks like much more than a standard strategic alliance. Important precedents were set and important risks were taken. Regardless of its outcome and cost, this is the kind of experiment that Japan needs more of in the longer term: a pooling of resources with the tacit acknowledgment that nobody who doesn’t work in automotive or consumer electronics works in the business anymore, what it was supposed to be.
Some analysts played down the element of surprise from the union and the extent of the likely benefit to both companies. At the Consumer Electronics Show in Las Vegas in January, Sony showed prototypes of its Vision-S and Vision-S 02 and formed one new EV daughter, but emphasized that you don’t want to build cars yourself. Honda, on the other hand, has been exposed by its lack of a clear EV strategy in an industry where that’s the trillion-dollar narrative. Two companies that need partners, so a convenient pairing in that light.
At the same time, analysts at Pelham Smithers Associates argue, the logic is shaky in places. Before the joint venture, Sony’s EV business could be read as a showcase of vehicle electronics (gaming systems, music systems, screens, 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 auto electronics capabilities across the industry. The threat to Honda, meanwhile, is that it will end up taking on the role of mere assembler for Sony — a role no self-confident global player wants, which explains why Apple hasn’t managed to find a high-end automaker just yet , willing to work with him it.
But despite all those caveats, several elements of the Sony-Honda venture stand out as milestones for Corporate Japan. The first is the extent to which Honda’s willingness to enter into this partnership can be read as an admission of its shortcomings – not as a maker of hardware, in which it continues to excel, but as a master of software. For Honda and other established automakers, one of the toughest lessons Tesla taught was the success of a vehicle built in significant part around its user-centric software.
Versions of this problem have long plagued Japanese companies: the inexorable rise of the software platform as a defining feature of consumer electronics has exposed a vast zone of vulnerability. Sony, compared to Apple, may not be world-best on this front, but as a developer of consumer platforms (especially the PlayStation), it’s 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 companies, a duo that exemplifies both entrepreneurial vehemence and rebellion for many reasons.
At the press conference announcing the joint venture and highlighting the cultural fit, a slide juxtaposed images of the two Sony founders with the two Honda founders, who looked just like the bespectacled visionaries they were. Her grin, meanwhile, hid a combative disregard for authority. In their early days, both companies had transformative struggles with the manipulative Japan Ministry of Commerce (which was trying to stop Honda from making cars and Sony from getting licensed to make transistors) and were forever defined by defying it.
Fortunately, the two companies came into their partnership without the involvement of the Department of Commerce. Even more critically, they did so despite their much-cherished independence. As such, this partnership recognizes how far both companies have been forced to reevaluate their priorities and implicitly recommends that other companies do the same.
CEOs of Honda and Sony said they would consider listing the joint venture. But for a Japanese company that needs positive guardrails and investors that need a narrative, it should be viewed as actively desirable.
This is a market that is increasingly needed by large, pure-technology companies. A publicly traded Hony or Sonda may never own more than a fraction of Tesla’s market cap. But its share price would be an important index of how, with a little creative thinking, Japan could value its greatest treasures much higher.
Sony and Honda’s EV venture is a lesson for corporate Japan Source link Sony and Honda’s EV venture is a lesson for corporate Japan