Honda and Nissan are entering formal talks to potentially merge, aiming to establish themselves as the world's third-largest automotive group and counter fierce competition from Chinese electric vehicle makers like BYD. Reports indicate the discussions are still early-stage but could culminate with significant synergies beneficial to both companies by the time they finalize the deal by June 2025.
According to Japan's Nikkei business newspaper, the two automakers are currently investigating how to operate under a holding company structure. While shares for Nissan jumped 8% and Honda saw a 1.5% increase after news of the talks emerged, uncertainties linger about the future and operational effectiveness of both brands.
Both Honda and Nissan expressed optimism during their joint press conference, setting ambitious targets. If realized, the merger would enable the companies to target over 1 trillion yen (approximately $6.4 billion) in synergy savings through shared research and development, procurement, and standardizing vehicle platforms. This cooperation could bolster their operating profit to over 3 trillion yen—a remarkable 54% increase from previous outcomes.
Yet, this prospective union faces significant challenges, particularly the growing dominance of their competitors. "Both companies lack compelling EV offerings, and the combined entity would still face the challenge of a new EV model pipeline and R&D in technology," stated Vincent Sun, senior analyst at Morningstar. Honda has historically leaned favorably toward hybrid models and has struggled to make substantial EV headway. Meanwhile, Nissan's attempt to position its new EV, the Ariya, crumbled due to production difficulties, hindering its ability to challenge established players like Tesla.
The increasing presence of Chinese manufacturers, particularly their soft wares and digital technologies, complicates matters for Honda and Nissan. The ranks of these competitors are sharpening as they pull consumers' interests away with innovative features and affordable pricing. Reports indicate these brands have dominated the electric vehicle market, leading Honda and Nissan to lose traction.
"Nissan’s reported drop in sales volumes indicates the urgent need to revitalize their product lineup and marketing strategies," experts say. For Nissan, weak demand from major markets, including China and the U.S., has caused them to announce drastic cost-cutting measures: reducing overall production capacity by 20% and announcing the layoff of 9,000 employees.
With Mitsubishi Motors as Nissan’s junior partner, it might also join the alliance, but its future involvement will be determined shortly. Both Nissan and Honda seem more focused on the U.S. and Japanese markets than diversifying their portfolio globally. Entering this merger without serious exploration of regional expansion could limit the synergy benefits they aspire to achieve.
Despite the apparent hurdles, both companies remain buoyant about the possibilities the merger presents. They both agreed to leverage each other's strengths for future collaboration—an approach they believe could culminate positively for tackling the imminent challenges posed by the Chinese market.
All eyes will be on their strategic developments leading up to December, when more announcements are expected. Investors have managed to retain some optimism, but analysts are still cautious, emphasizing the challenges both companies face to restore their presence and competitiveness, particularly concerning electric vehicles. There is palpable urgency: "If they don’t build their capabilities, they will be beaten by their rivals."
Reflected across the industry is the sentiment of necessity for more consolidations within automotive enterprises, especially for those at risk of fading away as technology advances. "The merger could change the game," says one analyst from Morgan Stanley. The automotive industry can anticipate more shifts, especially amid rising urgency to reclaim momentum against solid players from different regions.
Industry watchers and enthusiasts remain eager to see how this merger progresses and its inevitable impacts on car buyers and the global automotive market dynamically shifting toward electrification. The clock is ticking for Honda and Nissan to either solidify or reinvent their roles as major players; both will need to act swiftly to cultivate the synergies they envision delivering megadeals.
