Nissan Motor CEO Makoto Uchida (left) listens to Honda Motor CEO Mibe Toshihiro Mibe (right) during a joint press conference in Tokyo, Japan, March 15, 2024.
Tomohiro Ohsumi | Getty Images News | Getty Images
Japan’s top carmakers Nissan Motor Co and Honda Motor Co are exploring a blockbuster merger, sending shockwaves to the global auto industry as the rival companies seek to stay competitive on the road to full electrification.
Japanese business newspaper says Nissan and Honda are planning to hold merger talks Nikkei Index Overnight reports quoted people familiar with the matter as saying that domestic peers are expected to sign a memorandum of understanding soon.
The expected collaboration could create the world’s third-largest auto group by sales, with annual sales of 8 million vehicles, according to Citi. That would put Nissan-Honda-Mitsubishi behind Japanese automaker Toyota and crisis-hit Germany’s Volkswagen, respectively.
In similar statements, Nissan and Honda neither confirmed nor denied the Nikkei report.
The merger report comes as many auto giants grapple with growing global competition from large electric vehicle makers such as Tesla and China’s BYD.
Former Nissan and Honda forged In March, a strategic partnership was established to jointly produce key parts for electric vehicles.
However, mega-mergers are expected to face some hurdles. Analysts have raised concerns about the possibility of political scrutiny in Japan as job cuts could occur if the deal is passed, with the unwinding of Nissan’s alliance with French carmaker Renault seen as key to the process.
Peter Wells, professor of business and sustainability at Cardiff Business School’s Automotive Industry Research Center, described the reported merger as a “very important” development – one that could help Nissan and Honda consolidate assets, save costs and Create the technology they want.
“There’s been a lot of speculation over the last 12 months or so about Nissan’s position. It’s been trying to balance or balance the relationship with Renault but it’s been struggling,” Wells told CNBC’s “Roadmark Europe” on Wednesday. “programme.
“It’s been struggling in the market, it’s been struggling domestically, it doesn’t have the right product line. There are so many warning signs, so many red flags around Nissan right now that something has to happen,” He’s extra. “Whether that’s the answer is another question.”
Shares of Nissan soared 23.7% on Wednesday, marking the company’s best trading day in at least 40 years, according to data firm FactSet. The company’s Tokyo-listed shares are still down nearly 25% so far this year.
Meanwhile, Honda shares fell 3.2% in pre-market trading in New York.
Possible barriers to merger
Asked whether a merger between Nissan and Honda would be a good means of countering competition from Chinese electric car makers, Cardiff Business School’s Wells said the deal could be described as a “traditional solution”.
“My concern is that they may be a little late to the game and they don’t have the existing technology and setup (or) the right products to compete in their key markets,” Wells said.
“Especially for Nissan, they are disconnected from the U.S. market. That’s their main concern, but they can’t solve it quickly,” he added.
On April 1, 2024, in Jinhua City, Zhejiang Province, China, employees at the zero sports car factory of Chinese electric vehicle startup company worked on the new energy vehicle assembly line.
VCG | Visual China Group | Getty Images
JPMorgan ChaseAkira Kishimoto had a similar view on some of the obstacles to a Nissan-Honda merger, saying “the hurdles to overcome will be high.”
“We believe Nissan needs to at least clarify where its particularly complex capital relationship with Renault, which involves the French government, will ultimately go, and provide details on its announced restructuring plan,” Kishimoto said in a research note released on Wednesday. .
“We think Honda needs to show how it will manage major (battery electric vehicle) and battery investments in Canada,” Kishimoto said.
JPMorgan said it would now have to wait for any specific announcements from the two companies.
“Comprehensive transformation of the automobile industry”
“The partnership was not completely unexpected because obviously they announced the partnership earlier this year,” Mergermarket executive editor Lucinda Guthrie told CNBC’s “Signpost Europe” on Wednesday.
“Some Report I’ve seen some people claim this is the result of Foxconn’s engagement with Nissan. Now, with this particular deal, I wonder if it’s going to be a hardcore merger or more of a partnership,” she added.
Bloomberg reported on Wednesday that Apple supplier Foxconn has approached Nissan about taking a stake. The Taiwanese company has been investing heavily in electric vehicles in recent years. CNBC has reached out to Foxconn for comment.
Echoing the latest development, Honda recently tested the waters in a partnership with General Motors but ultimately decided to pull out.
Guthrie said speculation about a merger between Honda and Nissan could follow a similar trajectory.
A Nissan logo at a dealership in Richmond, California, USA, Friday, June 21, 2024.
Bloomberg | Bloomberg | Getty Images
“You have to remember that this has to be supported by the Japanese government because there are potential layoffs, but how are Japanese automakers going to compete with low-cost cars from China?” Guthrie said.
Arifumi Yoshida of Citibank said the merger could have a negative impact on Honda but a positive impact on Nissan and Mitsubishi.
“Given Honda’s competitiveness in motorcycles and (hybrid electric vehicles) and its brand strength, we believe it has the ability to compete with rivals over the next five to 10 years,” Yoshida said in a research note released on Wednesday. “
Nonetheless, Yoshida said the decision could be viewed as “anticipation of a comprehensive transformation of the automotive industry.”
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