The two Japanese companies announced in December that they had signed a memorandum of understanding, and Nissan’s smaller alliance partner, Mitsubishi Motors, also agreed to join talks on integrating their business operations.
“We believe that if this integration is realized, we will be able to deliver even greater value to a broader customer base,” Nissan CEO Makoto Uchida said in a statement.

Japanese carmakers have fallen behind major rivals in electric vehicles and are therefore seeking to cut costs and catch up.

Share prices rise on earlier rumors

News of a possible merger had already surfaced in early December 2024. According to unconfirmed reports, talks about closer cooperation were partly driven by Taiwanese iPhone manufacturer Foxconn’s efforts to partner with Nissan, which is allied with France’s Renault SA and Mitsubishi.
A merger could create a giant company valued at more than $50 billion (€48 billion) based on the combined market capitalization of the automakers. Together, Honda and Nissan—along with their alliance with Renault SA and the smaller Mitsubishi Motors—would gain scale relative to Toyota Motor Corp. and Germany’s Volkswagen AG.

Toyota would still lead even after a merger

Even after a merger, Toyota would remain Japan’s leading automaker, having produced 11.5 million vehicles in 2023. If combined, the three smaller companies would produce around eight million vehicles. Honda produced four million vehicles in 2023, Nissan 3.4 million, and Mitsubishi Motors just over one million.

In August 2024, Nissan, Honda, and Mitsubishi announced that they would share components needed for electric vehicles, such as batteries, and jointly research autonomous driving software to better adapt to the dramatic changes surrounding electrification. The initiative was launched based on a preliminary agreement between Nissan and Honda in March 2024.

Saving Nissan’s position

Honda, Japan’s second-largest automaker, is widely seen as the only likely Japanese partner capable of rescuing Nissan, which has struggled since the scandal that began with the arrest of former chairman Carlos Ghosn in late 2018. The allegations involved fraud and misuse of corporate assets, which Ghosn denied. He was later released on bail and fled to Lebanon.
On Monday, speaking to reporters in Tokyo via video link, Ghosn described the planned merger as a “desperate move.”

Benefits of cooperation

From Nissan, Honda could gain access to large, heavy-duty SUVs such as the Armada and Infiniti QX80, which Honda does not produce and which offer high towing capacity and strong off-road capabilities, Sam Fiorani, vice president at AutoForecast Solutions, told the Associated Press.
Nissan has also accumulated years of experience in battery and electric vehicle production, as well as gasoline-electric hybrid powertrains, which could help Honda develop its own EVs and next-generation hybrids, he added.

Challenges and outlook

In November, the company announced plans to cut 9,000 jobs—about 6% of its global workforce—and reduce global production capacity by 20% after reporting a quarterly loss of 9.3 billion yen (€58.6 million).
Nissan recently reshuffled its management, and CEO Makoto Uchida accepted a 50% pay cut to take responsibility for the company’s financial difficulties. According to him, Nissan must become more efficient and respond better to market preferences, rising costs, and other global changes.

Credit rating downgrade

Fitch Ratings recently downgraded Nissan’s credit outlook to “negative” due to declining profitability, partly caused by price cuts in the North American market. At the same time, it noted that Nissan has a strong financial structure, with solid cash reserves of 1.44 trillion yen (€9 billion).

In December, Nissan shares in Tokyo rose by 1.6%. A week earlier, they had jumped by more than 20% on news of a potential merger after falling to levels seen as a “bargain.” Honda shares rose 3.8% on the news. Honda’s net profit fell nearly 20% year-on-year in the first half of its April–March 2024 financial year due to declining sales in China.

Industry-wide consolidation trend

The merger reflects a broader trend of consolidation in the industry.
At a routine press briefing on Monday, Chief Cabinet Secretary Yoshimasa Hayashi said he would not comment on the details of the automakers’ plans but stressed that Japanese companies must remain competitive in a rapidly changing market.
“As the business environment surrounding the automotive industry changes significantly, and competitiveness in batteries and software becomes increasingly important, we expect the necessary measures to be taken to survive international competition,” Hayashi said.

Source: Euronews