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Honda (NYSE: HMC), Sony (NYSE: SONY) Plan EV Joint Venture to Challenge Tesla Inc. (NASDAQ: TSLA)

Honda (NYSE: HMC) and Sony (NYSE: SONY) are coming together through a joint partnership that will see them produce electric cars together. As the demand of electric vehicles (“EVs”) continues to grow, the Japanese companies will be challenging Tesla (NASDAQ: TSLA) and other traditional automakers as well as Chinese manufacturers.

Last week, both of the companies’ corporate executives told reporters that they would test the waters with the venture on the public market. This comes after EV manufacturers including Tesla achieved high valuations in technology stocks.

The partnership emphasizes Japan’s effort in growing its domination in the EV sector. Last year, Toyota and Nissan, Honda’s local competition, both made announcements regarding their plans to spend tens of billions of dollars.

Through this partnership, Sony will systematically distribute its sensor technology used in autonomous driving. This will also help in improving the company’s authority in consumer electronics. According to Toshihiro Mibe, Honda CEO, the new establishment will be innovative and operate strategically to get at the forefront of “expansion of mobility.”

The company will be set up this year, and it is expected to sell its first electric vehicle by 2025.

The partnership will see the creation of roles designated to each company. Honda will be in charge of producing the model of the electric car while Sony develops a service platform for the company. Sony hopes that the platform will be integrated not only by Honda but by other carmakers as well. According to Kenichiro Yoshida, the chief executive at Sony, the company wants the network platform to have the potential to be used by Honda, JV and other carmakers as well.

This news of the partnership comes weeks after Sony announced the launch of its own mobility unit. Yoshida stated that the company would be exploring its entry into the EV sector as well as work on a prototype automobile. Similarly, Honda has its own interests in producing electric vehicles for the North American market share with its announced partnership with General Motors.

Mibe states that the Honda-Sony venture will be distinguishable from the Honda brand and there is potential that the value this venture generates will have an impact on Honda. Honda changed its focus to producing EVs in April 2021. Through this partnership, the company will have access to chips as the country establishes the production volume of semiconductors. Sony is constructing a plant in Japan alongside chipmaker Taiwan Semiconductor Manufacturing Co and carmaker Denso that aims to produce chips by 2024.

As these companies bring their new EVs to market, they will face stiff competition from entities such as Rivian Automotive Inc. (NASDAQ: RIVN) that already have different models on the market.

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