Honda, Nissan’s Potential Merger: A Power Play in EV Market

• Honda and Nissan have initiated merger talks to compete in the electric vehicle (EV) market.
• The merger is not a bailout for Nissan, but a strategic move to create the world’s third-largest automaker.
• The merger talks have attracted attention from Foxconn, who initially attempted to acquire a majority stake in Nissan.
• If successful, the merger could reshape the automotive industry, particularly in the EV segment.

In a significant development in the automotive industry, Japanese auto giants Honda and Nissan have announced the commencement of merger talks. This move is seen as a strategic step to compete with Chinese rivals and Tesla in the electric vehicle (EV) market. The collaboration between the two companies would result in the creation of the world’s third-largest automaker, focusing on the development of EVs and self-driving technology.

The merger talks come at a time when Nissan has been grappling with financial difficulties. The company reported a 93% plunge in its first-half net profit last month, leading to the announcement of thousands of job cuts. However, Honda’s CEO, Toshihiro Mibe, has clarified that the merger is not a bailout for Nissan. He emphasized that one of the conditions for the merger would be for Nissan to complete its so-called turnaround plan.

The automotive industry has been facing several challenges, including lackluster consumer spending and stiff competition in various markets. The situation is particularly challenging for foreign brands in China, where local EV manufacturers like BYD are leading the way as demand for less polluting vehicles grows.

Challenges and Opportunities in the Automotive Industry

China surpassed Japan as the largest vehicle exporter last year, thanks to government support for EVs. In response to these changes, top government spokesman Yoshimasa Hayashi expressed hope that Japanese companies would take measures to survive and win amid international competition. He underscored the importance of strengthening competitiveness in areas such as batteries and in-vehicle software, although he declined to comment on the merger reports.

The merger talks between Honda and Nissan have also attracted the attention of Taiwanese electronics manufacturer Foxconn. The company, known for building devices for tech giants like Apple, initially approached Nissan with a bid to acquire a majority stake. However, this attempt was unsuccessful. Subsequently, Foxconn’s Jun Seki, a former Nissan executive, reportedly visited France to ask Renault to sell its 35% share of Nissan. These reports were later put on hold.

The merger talks are not the first collaboration between Honda and Nissan. In March, the two companies agreed to explore a strategic partnership on software and components for EVs among other technologies. This partnership was later joined by Mitsubishi Motors, a majority shareholder of Nissan, in August.

A Turbulent Decade for Nissan and the Road Ahead

The merger talks come after a turbulent decade for Nissan, marked by the 2018 arrest of its former boss Carlos Ghosn. Ghosn, who later jumped bail and fled Japan concealed in a music equipment box, commented on the merger talks via video link from Lebanon. He suggested that Nissan’s decision to merge with its arch-rival Honda indicated that the company was in panic mode. He also expressed skepticism about the potential benefits of the partnership, stating that he didn’t see anything obvious about this alliance.

The merger talks are expected to culminate in a deal by June 2025. The companies, along with Mitsubishi Motors, have signed a memorandum of understanding to start discussions on integrating their business under a new holding company. The holding company is planned to be listed on the Tokyo Stock Exchange in August 2026.

This merger, if successful, would be reminiscent of the Renault-Nissan-Mitsubishi Alliance, which was formed in 1999. The alliance, which was aimed at achieving profitable growth for the three partner companies and synergizing their operations, has been one of the world’s leading automotive alliances. The proposed Honda-Nissan merger could potentially follow a similar path, leveraging the strengths of both companies to compete effectively in the rapidly evolving automotive industry.

In conclusion, the merger talks between Honda and Nissan represent a significant shift in the automotive industry. The collaboration could potentially reshape the landscape of the industry, particularly in the EV segment. However, the success of the merger will depend on various factors, including the completion of Nissan’s turnaround plan and the ability of the two companies to synergize their operations effectively. This development underscores the dynamic nature of the automotive industry and the continuous efforts by companies to adapt and thrive in a rapidly changing environment.