TOKYO: Nissan Motor is considering seeking a business partnership with Honda Motor on key components for electric vehicles to cut production costs, three people familiar with the matter at Nissan said.

The potential partnership with domestic rival Honda will help Nissan gain scale, which is crucial for Japanese automakers as they face heavy competition from China’s BYD, Tesla and other electric vehicle makers.

The sources, who declined to be identified as the matter is still private, said that Nissan and Honda are yet to formally start discussions, with the scope of the partnership undecided.

Another source said the idea of collaboration emerged between the chief executives of the companies.

Nissan is considering partnering with Honda on key EV parts, as well “kei car” - boxy vehicles that are smaller and less powerful than regular cars, primarily made for the domestic market.

The partnership could extend to overseas businesses, but that would affect Honda’s existing collaboration with General Motors, according to two of the sources.

Nissan’s pursuit of a partnership was first reported by TV Tokyo.

A Nissan spokesperson declined to comment.

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A Honda spokesperson said there was nothing the company could say.

A source at Honda said a potential partnership with Nissan is one of many possibilities that the company is considering, but there are many agenda that need to be sorted out for it to proceed with a new tie-up.

Honda is aiming to increase its ratio of electric vehicles and fuel cell vehicles to 100% of all sales by 2040.

Nissan already cooperates with Renault on EVs, mainly in Europe.

The next Nissan electric Micra will share the same architecture as the new Renault Five and be built in the same plant in northern France.

Nissan has also committed to invest up to 600 million euros ($652.50 million) in Renault’s new electric vehicle entity Ampere.

But the two firms last year reduced the scope of a years-long alliance to allow for a more agile partnership, and Renault has since signed agreements with new partners such as China’s Geely.