HONDA SONY ELECTRIC 1 1647940070249 1656439898462

Sony’s next big thing in tech is helping Honda beat Tesla

The electric car alliance has developed recently, but the relationship between them goes way back.

In early 2020, Sony Group Corp CEO Kenichiro Yoshida took the stage at the Consumer Electronics Show in Las Vegas — the tech industry’s major annual event — and announced a pivotal once-in-a-decade: the Japanese electronics maker joined the electric car race.

When Yoshida concluded his 30-minute show, the lights on stage dimmed and a glowing net emerged from the shadows. The CEO raised his hands as a stylish Sony-branded car rolled onto the stage. Like cell phones over the past decade, the Sony boss has declared, “the next trend will be mobility.”

With Yoshida’s announcement, the 76-year-old Japanese company has joined a growing list of tech giants planning their foray into the auto industry. As cars become electric, autonomous, stocked, and connected to the internet, the movement is attracting a wide range of new players — most famously Apple Inc. With Apple Car — all of them are betting they have the technologies to disrupt the $3 trillion market.

While Big Tech’s struggle has been largely underestimated by many of today’s automakers, Yoshida’s push, 62, earned him an unexpected fan once again in Japan: Toshihiro Mibe, who at the time ran research and development at the company. Honda Motor.

Of all the automakers in Japan, Honda has thrown itself the most aggressively into electric vehicles, targeting a complete phase-out of sales of combustion engine vehicles by 2040. From the start, Honda saw potential to collaborate with Sony through consumer electronics, driving sensors, and more. Automation as a way to differentiate new models and add value to the low-margin business of the auto industry.

Behind the scenes, Mibe has spent years courting Sony’s top management, seeking to sell it based on his vision of potential synergies between companies, people familiar with the CEO’s approach said. When Mebe, 60, became Honda’s CEO last year, those initiatives gained new weight. The people, who asked not to be identified because the details, said that after a number of meetings between individuals ranging from corporate CEOs to engineers, plans for the joint venture began to take hold at the end of 2021.

This culminated in the unveiling of two plans to create a new company to develop and sell next-generation electric vehicles. Two iconic companies, a symbol of Japan’s economic recovery from the ruins of war, were united together.

“Companies from completely different industries have different cultures and different sources of value,” Meeby said, speaking of Honda’s partnership with Sony in an interview in April. “There was an idea that we could create a chemical reaction together. That was a great concept, and I met President Yoshida and said, ‘Let’s do this.'”

For Honda, the MiB approach makes sense. Over the past few years, Tesla Inc. With self-driving features and the ability to improve vehicle performance via over-the-air updates such as the iPhone, it highlights the knowledge gap when it comes to the software that powers the next generation of cars.

Sony envisions the cars will be connected to the cloud and equipped with internal sensors that will eventually enable Level 4 autonomous driving. At this point, the cars don’t require human interaction in most circumstances, so drivers are freed from playing or viewing Sony content. Honda confirmed that these technologies are under study for future joint venture models, the first of which is scheduled to be launched in 2025.

For Sony, partnering with Honda gives it access to supply chains, production knowledge and vehicle sales expertise. Automakers’ operations are subject to strict safety standards and must be responsible for the entire life cycle of their vehicles, from maintenance to final scrapping.

While the process of forming Big Tech-automaker partnerships can be challenging, the model is “necessary” to keep pace with the rapid development of automobiles, said Olaf Sakers, co-founder of RedBlue Capital, an early investor in mobility startups.

“There is a clear target — Tesla — compared to what everyone else is getting behind,” Sackers said. The Sony-Honda alliance makes clear that “companies have to realize what their core competencies are and where they need technology and partners,” he said. Not only is there likely to be more consolidation within the auto industry itself in the future, but the “partnership model will see more and more.”

This does not mean that it will be easy. Apple has searched extensively for an ally to help it develop and produce its car, but talks with companies such as Hyundai Motor and Ferrari NV have stalled, likely because they are worried they will become an assembler for a product that may end. So dismantle their business. Most automotive-technology connections to date have eschewed 50-50 partnerships like Honda and Sony.

Operational differences may also jeopardize long-term cooperation, including the relatively slow and subtle pace of development in the auto industry, according to Bloomberg Intelligence analyst Tatsuo Yoshida.

Yoshida said that while Sony has a hand in a wide range of businesses from games to movies and music, Honda’s fate is closely tied to the allure of its electric cars. This means that it will bear the brunt of the losses if the partnership is to expire after its initial launch of 2025. “The real question is what comes next,” Yoshida said.

However, Honda chose Sony among several potential candidates for electronics companies, and Sony was also looking for a manufacturing partner. The companies say they chose each other for a reason.

During a joint briefing in March, Yoshida and Maebe said that their shared culture of wanting to “challenge the next big thing,” will help bridge the gap between their industries. As evidence of this, the CEO of Sony alluded to the historical relationships of the companies going back to their founders, Soichiro Honda and Masaru Ibuka.

Honda and Ibuca were famous for forming a close friendship while building their business. The two first met in the mid-1950s, when Honda visited Sony’s headquarters and asked co-founder Ibuka if the semiconductors used in transistor radios could also be used to turn motors on and off—a radical idea at the time. The companies tested the idea, but in the end it didn’t move forward, Ibuka wrote in a 1990s book he wrote about the founder of Honda.

However, Ibuka remembers that their desire to try new things has continued to bring the two leaders together over the years. “Honda and Sony prioritize making attempts, which means failures often happen,” Ibuka wrote in their respective works.

“Success and failure are two sides of the same paper,” Ibuka wrote, referring to the Honda founder’s famous sentence. “With everyone so determined not to fail, that’s why successes are so rare.”