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Breaking: Honda and Nissan in Merger Talks, Potential Creation of World’s Third-Largest Automaker

19 December, 2024

Japanese automakers Honda and Nissan are exploring a potential merger, as Nissan faces business challenges in the US and Chinese markets.

According to Nikkei Asia, Honda and Nissan are in talks regarding a possible merger or collaboration, although no final decision has been made yet. The discussions include the potential involvement of Mitsubishi Motors, creating a powerhouse with a combined sales volume of over 8 million vehicles, which would be the third-largest automotive group in the world.

Honda and Nissan, longtime rivals, have grown closer in recent times, exploring cooperation in electric vehicle technology and seeking to share the increasingly high development costs. Their biggest common challenge lies in China, where the market has abruptly shifted towards electric and hybrid vehicles. A collaboration would allow them to benefit from each other’s strengths despite their cultural differences, and there is also some overlap in their vehicle lineups.

Nissan has been struggling to recover from the scandal involving its former chairman, Carlos Ghosn, who was arrested in November 2018, amid internal tensions over Nissan’s alliance with French automaker Renault. Ghosn, who was indicted in Tokyo, fled Japan in December 2018, and an international arrest warrant has been issued for him. He faces charges related to suspicious payments within the Renault-Nissan alliance, totaling over 15 million Euros (16.3 million USD)

Nissan has recently announced deep cuts to its global operations to refocus its business and regain lost market share in the growing electric and hybrid vehicle markets in China and the US. The Japanese automaker plans to reduce 9,000 jobs and 20% of its global production capacity, with CEO Makoto Uchida also taking a 50% pay cut, according to the company.

This comes as Nissan’s sales have declined across its core markets of North America, China, and Japan in the first half of the fiscal year, with operating profit plunging 90% to $214 million during the April-September period.

Honda, meanwhile, announced plans earlier this year to reduce its gasoline car production capacity in China by 30%, equivalent to about 10% of its global output. This was due to a sharp drop in Honda’s sales in Japan, which caused disruptions throughout its Chinese supply chain. Three out of seven production lines in the world’s largest auto market will be closed.

“If Japanese carmakers continue to be cautious and indecisive about electric vehicles, their failure in the global auto market is only a matter of time,” said Yale Zhang, CEO of Automotive Foresight, a consulting firm.

Experts worry that Japanese automakers may be repeating past mistakes made by the country’s semiconductor and consumer electronics industries. Japanese companies once dominated the world with NEC’s memory chips and Sony’s Walkman, but they eventually fell behind as Apple surged ahead with its innovations.

“Japanese automakers seem to have been left behind and are unlikely to catch up,” said Shingo Ide, director of capital strategy at NLI Research Institute, a think tank of Nippon Life Insurance.

Sources: Nikkei Asia, WSJ