On Wednesday, both companies acknowledged ongoing talks aimed at enhancing cooperation while clarifying that no merger agreement is in place.
Following speculation from unnamed sources about a potential merger that could establish the world’s third-largest automaker, Nissan’s share price surged by nearly 24% in Tokyo, while Honda’s dropped by as much as 3%. Mitsubishi Motors Corp., a member of the Nissan alliance, is also participating in these discussions.
Trading in Nissan’s shares was briefly halted before resuming after the companies released a joint statement indicating that they are considering various possibilities for future collaboration, but no decisions have been made.
The rise of Chinese automakers is shaking up the industry as manufacturers transition from fossil fuel vehicles to electric ones. Competitors like BYD, Great Wall, and Nio are increasingly capturing market share from U.S. and Japanese carmakers both in China and globally.
Japanese automakers have been striving to catch up in the electric vehicle (EV) sector and are looking to reduce costs amid this competitive landscape.
In August, Nissan, Honda, and Mitsubishi announced plans to share components for electric vehicles, such as batteries, and collaborate on autonomous driving software to adapt to significant changes in the auto industry driven by electrification. A preliminary agreement between Honda, Japan’s second-largest automaker, and Nissan, the third-largest, was initially disclosed in March.
A merger could potentially create a giant valued at around $55 billion based on the market capitalizations of the three companies.
This partnership would allow the smaller Japanese automakers to gain scale and better compete with Japan’s market leader, Toyota Motor Corp., as well as Germany’s Volkswagen AG. Toyota has already formed technology partnerships with Mazda Motor Corp. and Subaru Corp.
Nissan offers large, truck-based SUVs such as the Armada and Infiniti QX80, which Honda does not currently provide, boasting greater towing capacities and off-road capabilities, according to Sam Fiorani, vice president of AutoForecast Solutions.
Additionally, Nissan possesses extensive experience in building batteries, electric vehicles, and hybrid powertrains, which could be beneficial for Honda in developing its EVs and next-generation hybrids, Fiorani noted.
Nissan has product segments that Honda doesn’t currently cover, said industry analyst Sam Abuelsamid from the Detroit area, emphasizing that a merger or partnership could be advantageous.
While Nissan’s electric Leaf and Ariya have not performed strongly in the U.S. market, they are considered solid vehicles. They have not been idle; they have been advancing their technology, Fiorani said. New products are on the way that could serve as a strong foundation for Honda’s next generation.
Last month, Nissan announced it would cut 9,000 jobs—about 6% of its global workforce—and reduce global production capacity by 20% following a quarterly loss of 9.3 billion yen ($61 million).
Earlier this month, Nissan restructured its management, and CEO Makoto Uchida took a 50% pay cut to address the financial challenges, stating the company needed to improve efficiency and better respond to market demands, rising costs, and various global changes.
Fitch Ratings recently downgraded Nissan’s credit outlook to “negative,” citing declining profitability, partly due to price cuts in the North American market. However, it acknowledged Nissan’s strong financial structure and solid cash reserves of 1.44 trillion yen ($9.4 billion).
Nissan’s falling share prices have led some to view it as a valuable investment opportunity. Reports from the Japanese financial magazine Diamond indicated that the urgency for discussions with Honda increased after Foxconn, the Taiwanese manufacturer of iPhones, began exploring a possible acquisition of Nissan as part of its expansion into the EV market.
Nissan has faced challenges in recent years, particularly following the scandal involving former chairman Carlos Ghosn, who was arrested in late 2018 on charges of fraud and misuse of company assets—allegations he denies. Ghosn eventually fled to Lebanon while out on bail.
Honda has reported nearly a 20% drop in profits for the first half of the April-March fiscal year compared to the previous year, largely due to declining sales in China.
In 2023, Toyota produced 11.5 million vehicles, while Honda manufactured 4 million and Nissan 3.4 million, with Mitsubishi Motors generating just over 1 million. Even if a merger occurs, Toyota would still hold its position as the leading Japanese automaker.
All global automakers face potential challenges if President-elect Donald Trump pursues threats to impose tariffs on imports, even from allies like Japan, as well as neighboring countries like Canada and Mexico. Nissan has adjusted its supply chains to include vehicles assembled in Mexico.
Moreover, analysts highlight an affordability shift in the industry, as consumers increasingly feel unable to afford nearly $50,000 for a new vehicle. This trend is compelling automakers like Nissan, Honda, and Toyota to reconsider pricing strategies, which may further impact industry profits.
Source: abcnews.go.com
