Nissan Motor Co., Ltd. ( NSANF ) and Honda Motor Co., Ltd. ( HMC ) are contemplating a collaboration in the development of automotive software and EV charging infrastructure to enhance their competitiveness in the electric vehicle market.

What Happened: The two Japanese automakers are considering a partnership to jointly develop operating systems and other automotive software, which could potentially reduce related costs, reported Nikkei on Wednesday.

This move is intended to help the companies catch up in the EV market, where they have lagged behind competitors like Tesla Inc ( TSLA ) and China’s BYD Co Ltd ( BYDDF ) (OTC:BYDDY).

Software plays a crucial role in enhancing a vehicle’s basic functions and can be updated to continuously improve capabilities. The partnership could also extend to the development of EV charging infrastructure, a critical factor in the EV market.

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Earlier in March, Nissan and Honda ( HMC ) announced that they were considering a comprehensive strategic partnership, which could include cooperation in six fields, including EV batteries. This potential collaboration in automotive software and EV charging infrastructure is a further step in this direction.

Why It Matters: The potential tie-up between Nissan and Honda ( HMC ) comes at a time when Japanese automakers are facing increased competition in the EV market, particularly from Chinese manufacturers like BYD. In response, Nissan and Honda ( HMC ) have been exploring various strategies to boost their EV capabilities.

In March, the two companies entered into a memorandum of understanding for a strategic partnership in vehicle electrification and intelligence, including automotive software platforms and core components related to EVs.

Nissan recently teamed up with Chinese tech giants Tencent and Baidu to enhance their AI capabilities in China, a crucial market for EVs.

Despite these efforts, the Japanese automakers have been facing challenges in the EV market. In March, it was reported that Nissan and Honda ( HMC ) were considering reducing production in China due to increased competition from EV manufacturers like BYD.

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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote