Honda & Nissan in Discussion to Co-Develop Advanced Auto Software

Honda Motor Co., Ltd. HMC and Nissan Motor Co., Ltd. NSANY are in discussions to jointly develop and share a foundational software platform for advanced vehicle control systems, per sources. The move is part of their effort to catch up with leading U.S. and Chinese automakers in the growing field of software-defined vehicles (SDVs).

The two companies aim to introduce vehicles utilizing the new software in the latter half of the decade. As SDVs become more prominent in the global automotive landscape, they require massive data inputs for both development and ongoing operation, making strategic collaboration crucial for accelerating innovation and reducing costs.

Tesla and several Chinese automakers currently lead in the SDV space, while Toyota and Mazda are also considering adopting shared software strategies. Honda and Nissan's ongoing discussions mark the latest attempt at collaboration, following the end of previous merger talks in February after Nissan declined to become a Honda subsidiary.

Since initiating a feasibility study in March 2024, both automakers have been evaluating potential collaborations in software development and EV charging infrastructure. However, Honda has indicated that it still plans to launch electric vehicles equipped with its proprietary software beginning in 2026.

In separate news, Nissan may begin manufacturing pickup trucks for Honda at its U.S. plants under a proposed strategic agreement. This would allow Honda to diversify its U.S. vehicle lineup, where it currently has limited presence in the pickup segment and mitigate the financial impact of new tariffs. For Nissan, the deal could improve factory utilization, which remains below break-even levels, and help offset declining sales due to its lack of competitive hybrid models.

The two companies are currently discussing this potential partnership. Both automakers view the United States as a crucial market, though recent tariff increases on Japanese imports have intensified pressure. The levies are projected to reduce Honda’s operating profit by ¥650 billion and Nissan’s by up to ¥450 billion in fiscal 2025. A manufacturing agreement between the two could enhance profitability for both firms.

Honda & Nissan’s Zacks Rank & Key Picks

HMC & NSANY carry a Zacks Rank #4 (Sell) each at present.

Some better-ranked stocks in the auto space are Geely Automobile Holdings Limited GELYY and Aisin Corporation ASEKY, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for GELYY’s fiscal 2025 sales implies year-over-year growth of 76.25%. EPS estimates for fiscal 2025 and 2026 have improved 27 cents and 47 cents, respectively, in the past seven days.

The Zacks Consensus Estimate for ASEKY’s fiscal 2026 sales and earnings implies year-over-year growth of 7.32% and 58.89%, respectively. 

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This article originally published on Zacks Investment Research (zacks.com).

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