Honda Motor Co. and Nissan Motor Co. have initiated discussions regarding a potential merger that could position them as the third-largest automaker group globally by volume. This consideration comes in response to escalating competition in the electric vehicle (EV) sector, dominated by notable international players like Tesla and Chinese manufacturers such as BYD.
Sources indicate that the two automotive giants are exploring the creation of a holding company, aiming to form an alliance that would bolster their standings against formidable competitors. The discussions have surfaced alongside speculation that Taiwan’s Foxconn, known for its electronics prowess, has made a buyout proposal for struggling Nissan, leading some to view the merger talks with Honda as a strategic move to counter Foxconn’s efforts.
Honda President Toshihiro Mibe confirmed to reporters that while they are contemplating collaboration, no definitive plans are in place. He stated, “We are considering collaboration. Other possibilities are also being considered, but nothing has been decided.” An announcement regarding the discussions could be forthcoming as soon as next Monday.
In collaboration with Mitsubishi Motors Corp., which has partnered with Nissan, both automakers have been analyzing various opportunities to enhance their operational capabilities, particularly in EV production and software technologies, to improve cost-effectiveness and competitiveness. Despite the ongoing feasibility study initiated earlier this year, Mibe emphasized that current talks lack a capital tie-up but did not dismiss future financial collaborations.
The automotive industry is grappling with challenges surrounding the high costs associated with EV development, which include expensive batteries and the substantial investment in software capabilities, particularly for innovative features like autonomous driving.
Both Honda and Nissan have reported declining sales in China, where competitive local EV brands are gaining traction. Recent business forecasts have led Honda to lower its net profit outlook to 950 billion yen ($6.2 billion), indicating a 14.2 percent decrease compared to the previous year, prompted by disappointing auto sales, particularly in China. Concurrently, Nissan disclosed plans to eliminate 9,000 jobs and reduce its global output capability by 20 percent as part of a strategy to address ongoing challenges in the U.S. and Chinese markets.
In terms of sales, Honda recorded 3.98 million vehicle sales in 2023 while Nissan reported 3.37 million. For context, Toyota continues to lead the global market with sales reaching 11.23 million vehicles, followed by Volkswagen’s 9.24 million.
The news of potential merger talks led to significant changes in the stock market, with trading of Nissan shares temporarily halting before resuming, ultimately closing nearly 24 percent higher. Meanwhile, Honda’s shares saw a slight decline of about 3 percent.
This potential merger could pave the way for a stronger competitive position for both Honda and Nissan in the rapidly evolving automotive landscape. The collaboration might not only enhance their capabilities in electric vehicle production but could also foster innovative partnerships leading to technological advancements that benefit the industry as a whole. With strategic alliances becoming increasingly important in today’s market, this could mark a hopeful turn for both companies as they navigate through challenges in the global automotive environment.