Honda Motor Co and Nissan Motor Co agreed to collaborate on the development of in-vehicle software last week but at least one academic says the duo should be joined by heavyweight Toyota Motor Corp, in order to better compete with foreign rivals.

“Only two or three operating system makers for cars will survive - globally,” said Hiroaki Takada, an information science professor at Nagoya University, who also chaired the Japanese government’s committee on software-defined vehicles.

Japan set a goal in May of having Japanese companies account for 30% of the software-defined vehicle market worldwide by 2030. Automakers or technology firms responsible for the operating systems behind the software to make cars smarter and more autonomous will become just as crucial to advances in passenger transport, as those making engines or batteries.

Currently, the leaders in that field are Chinese automakers and Tesla Inc. However, in the same way the smartphone sector is ruled by Google and Apple Inc with their Android and iOS for iPhone operating systems, so too will the car industry be ultimately delineated, Takada said.

Were Toyota to join Honda and Nissan (and likely also Mitsubishi Motors Corp) in the development of an operating system for cars, that would be one “possible way” for Japan to become a world leader, Takada said.

Google and Huawei Technologies Co are likely to emerge as strong operating system manufacturers in the automotive industry, Takada said, adding that even Tesla would find it difficult to do independently.

Honda, Nissan and Mitsubishi combined sold about 8.5 million units globally in the fiscal year that ended in March, lower than the some 11 million units sold by Toyota group companies. When sales from carmakers that Toyota has a shareholding in are added, including Mazda Motor Corp, Subaru Corp and Suzuki Motor Corp, that number balloons to around 16.5 million units.

Japan’s Ministry of Economy, Trade and Industry estimates that software-defined vehicle sales worldwide will reach between 35 million to 41 million units in 2030, while global revenue from robotaxi services will touch ¥80 trillion (US$550 billion) by 2035.

The opportunity this presents really became apparent to Japan and its automakers at last year’s Shanghai auto show, said Takeru Ito, a director in the ministry’s mobility digital transformation office. 

“We realise Japan lags behind in this field,” hence cooperating becomes crucial to survive, he said in an interview.

Last week, Honda chief executive officer Toshihiro Mibe said the automaker will “naturally” collaborate with Nissan on operating systems. It’s working on one that it plans to install in electric vehicles (EVs) in North America next year. Toyota, meanwhile, is set to launch its own operating system called Arene next year. If that happens, Japan will be divided into two software building camps. 

Legacy automakers are already feeling the cost burden of developing EVs and now with software-defined vehicles, their businesses will be “difficult to sustain if they continue their old practices,” Nobuhito Abe, a partner and the Asia Pacific lead of automotive at Kearney, said.

  - Bloomberg