A historic pivot for Japan's auto industry is underway as Honda and Nissan announced on Monday the start of talks toward a potential merger. This move aims to bolster their competitiveness against the rising threat from Chinese electric vehicle (EV) manufacturers, which have begun to make substantial impacts on the global market.
The proposed merger, if successful, would create the world's third-largest automotive group by vehicle sales—trailing only Toyota and Volkswagen. The integration effort is particularly timely, as the automotive market shifts rapidly, necessitating companies to pool resources to navigate the changing industry landscapes.
At a joint press conference held on Monday, Honda's CEO Toshihiro Mibe and Nissan's CEO Makoto Uchida articulated the urgency of this merger. Mibe underscored the growing influence of Chinese auto manufacturers, stating, "There is a rise of Chinese power and changing forces; the structure of the automobile industry is changing." He also highlighted the need for business integration to lead the global market once again.
The discussions between Honda and Nissan are being conducted with the potential involvement of Mitsubishi, which is under Nissan's ownership. Mitsubishi's participation could augment the new entity's strength, as it would bring additional resources and capabilities to the table.
Both Mibe and Uchida emphasized the expected benefits of the merger, with Mibe noting, "The purpose of the agreement would be to share intelligence and resources, provide economies of scale and synergies, and protect both brands." They forecast potential revenue generation of 30 trillion yen, equivalent to approximately $191.4 billion, with projected operating profits exceeding 3 trillion yen.
The timeline for concluding these merger discussions is set for June 2025, with plans to establish the holding company by August 2026. This timeline indicates both companies' recognition of the urgency to adapt to the rapidly changing automotive environment.
Industry analysts see this merger as not only advantageous for Honda and Nissan but also as necessary for counteracting the competition posed by Chinese manufacturers like BYD, who are rapidly gaining traction with their innovative approaches and cost-effective offerings. BYD has reportedly surpassed Tesla's EV revenue sales during the third quarter of 2024, raising alarms for traditional manufacturers.
Recent financial performances have added pressure to both companies. For example, Nissan experienced disappointing results for the first two quarters of fiscal year 2024, leading to significant workforce reductions aimed at cutting costs. Similarly, Honda faced struggles with overall sales, highlighted by a notable 21.5% drop in vehicle sales within China this past year.
Despite the promising aspects of this merger, not everyone shares the same enthusiasm. Former Nissan chairman Carlos Ghosn expressed skepticism over the feasibility of the alliance, claiming, "I do not believe the Honda-Nissan alliance would be successful, and the two automakers are not complementary."
Given these mixed signals, the merger talks represent not only strategic planning between two of Japan’s leading automakers but also highlight the greater shifts happening within the industry. The necessity to innovate, particularly concerning electric vehicle technology, remains at the forefront of both companies' strategies.
The stakes involved are enormous; merging operations could leverage capabilities for creating low-cost electric vehicles, as both companies have been lagging behind competitors. According to Uchida, "There are limits if we are to [develop EVs] alone, which has prompted us to engage in partnership."
With the outcome yet to be determined, all eyes are on Honda, Nissan, and Mitsubishi as they navigate discussions of resource sharing, brand preservation, and technological advancement amid pressures from aggressive competitors.
