General Motors and Honda are expanding their electric-vehicle partnership. That collaboration could be a model for the rest of the industry.

• General Motors and Honda announced that the carmakers would expand their partnership to develop two new electric vehicles, designed by Honda, but using GM's new Ultium technology and manufactured at a GM plant.
• GM and Honda aren't merging, but their EV collaboration is starting to look like an experimental tie-up to pursue new technologies and new markets.
• The history of mergers in the auto industry is uneven, but GM and Honda are exploring new territory.
• The impact of COVID-19 globally could accelerate a wave of consolidation currently underway in the auto industry.
• Visit Business Insider's homepage for more stories.

On Thursday, General Motors and Honda announced that the companies would expand their partnership to develop two new all-electric vehicles, using a GM platform and battery technology that was unveiled last month.

The battery tech is called Ultium, and the GM-Honda collaboration is an extension of a deal that was unveiled in 2018, with the carmakers jointly designing a shared-mobility vehicle for Cruise, the San Francisco autonomous-mobility firm that GM acquired in 2016 (Honda later joined an investment round in Cruise that brought the startup's valuation to nearly $20 billion).

In January, Cruise pulled the cover the Origin, the first vehicle to emerge from the effort.

Operating as a semi-merged entity

What's particularly interesting about the new announcement is that it demonstrates GM and Honda working on EVs as a semi-merged entity. The auto industry has been slowly consolidating since the 2009 financial crisis, when Fiat and Chrysler combined, eventually becoming Fiat Chrysler Automobiles. Prior to the COVID-19 pandemic, FCA and France's PSA Group were proceeding with a subsequent tie-up.

Nobody expects GM and Honda to merge (although after the Great Recession, there was some talk about Honda joining forces with BMW). However, Honda and GM now have an equity stake in a company, Cruise, that's being funded off GM's balance sheet to the tune of $1 billion annually.

The new EVs that were announced this week will be "exclusively designed by Honda, and the platform will be engineered to support Honda's driving character," the carmakers said in a statement. But they'll use the Ultium technology - and be manufactured by GM, thereby enabling the number-one US automaker to better utilize its US production capacity.

"We are in discussions with one another regarding the possibility of further extending our partnership," Rick Schostek, American Honda Motors' vice-president, said, tantalizingly, in a statement.

Adding even more to the collaboration was the news that GM and Honda would merge their connectivity technologies, OnStar and Honda Link. And the companies said that GM's Super Cruise handsfree, self-driving system would be included in the new vehicles.

GM has already pledged to launch 22 new electric vehicles by 2023, and it said that the new GM-Honda EVs would hit the North American market in 2024.

Creating a separate EV division, while retaining independent brand integrity

For the record, Ford is pursuing a similar, if currently less extensive, strategy with the VW Group.

And FCA has been working with Tesla to pool emission credits in Europe, with CEO Mike Manley suggesting that FCA could buy Tesla's drivetrain technology at some point.

Partnerships are nothing new in the car business; back in the 1980s, Chrysler collaborated with Maserati. Daimler owned Chrysler in the pre-financial-crisis period. The Renault-Nissan-Mitsubishi alliance has been going for decades.

But the GM-Honda effort looks a lot more like the creation of a separate EV division, organized around jointly-designed vehicles, and in Cruise, a near-standalone company as part of the deal. Of course, the brand integrity of both companies remains: GM intends to sell all-electric Chevys, Buicks, GMCs, and Cadillacs. The two new Honda vehicles would be Honda-badged.

Obviously, the risk here - as with so many collaborations from the industry's past - is that consumers won't be able to figure out what's going on. But the fact that the products would be EVs in a burgeoning market should mitigate that problem.

The COVID-19 pandemic could also be a factor. US auto sales in 2020 could be devastated by the shutdown of the US economy; during the Great Recession, the entire EV market, save Tesla, was decimated. It's taken a decade for it to recover. The world's carmakers are going to lose so much money on 2020 that maintaining individual progress on EVs could become a struggle. If the future is electric, then the future could also see a substantial level of industry consolidation.

That would be good for business - but potentially bad for consumer choice. That said, there's general agreement that going solo in the EV market is extremely challenging; Tesla has never posted an annual profit, in 16 years. So while previous partnerships were driven by familiar business realities, what GM and Honda are doing is more about defining a future and trying to get ahead of the evident cost issues, which are considerable given that EVs make up only about 2% of global sales and haven't shown much profit potential.

As a pioneering undertaking, though, GM-Honda is the one to watch.