The benefit to Nissan is easy to see but I think this could hurt Honda more than help if not done correctly and M&A on this scale is almost never done correctly.
Honda and Nissan might combine to form world’s No. 3 auto group
By Kazuaki Nagata and Yukana Inoue
Dec 18, 2024
Honda and Nissan may merge to form the world’s No. 3 auto group, achieving the scale needed to go up against foreign competition and make massive investments into advanced electric vehicle technologies.
“I think this move reflects the current industry trend where automakers need to scale up to prepare for competition that involves autonomous driving and EVs," said Atsushi Osanai, a professor at Waseda Business School.
According to press reports Wednesday morning, the two Japanese carmakers are in discussions to consolidate under a holding company. The reports also said that Mitsubishi Motors, which has been working closely with Nissan since 2016, might join the grouping.
Nissan, Honda and Mitsubishi confirmed the reports in nearly identically worded statements released later in the day. The three said they are considering a number of options including the plan mentioned in the press reports.
“Nothing has been decided at this time,” the statements noted.
Honda CEO Toshihiro Mibe told reporters on Wednesday morning that “there is a possibility” of such a merger, TBS reported.
Honda and Nissan have been working together for months on a deal of some sort. They have been in talks since March on combining resources to develop technology related to emissions, self-driving vehicles and advanced automotive software.
In August, they announced that they will be working together on the development of vehicle operating systems and other EV-related technologies to save on costs and better compete in markets.
It is not clear from the company statements whether talks have advanced further or whether the press reports were simply a rehashing of what has already been disclosed in terms of discussions and goals.
Trading in Nissan shares was halted on Wednesday morning. They rose after trading resumed and ended the day up 23.7%. Shares of Honda were down 3% by the end of trading on Wednesday afternoon, while Mitsubishi Motors closed up 19.7%.
"Historically, Honda has been a company that has gone its own way, so I was quite surprised to see the reports that it is seeking a merger with Nissan,” said Osanai.
In the first half of this fiscal year, Nissan’s net profit fell about 90% mainly due to sluggish sales in North America and China. Following the weak earnings report, the company announced it would cut 9,000 jobs globally.
In future automotive technologies, critical mass is important, with the survival of even the largest companies hinging on the ability to develop in-house systems and batteries. Scale will be essential to go up against the likes of Texas-based Tesla and Shenzhen’s BYD in the making and selling of EVs.
“The current scales of Nissan and Honda are not really enough,” said Osanai. “A merger would therefore place them in a more advantageous position.”
Last year, Honda’s global sales were 3.98 million units and Nissan’s were 3.37 million, meaning that if merged, they could become the third-largest auto group in the world, after Toyota and the Volkswagen Group.
As the demand for EVs has been sluggish and hybrid vehicles have been selling well, Honda’s hybrid technology will be key, Osanai added. It can go toe-to-toe with Toyota’s technology.
The lack of popular hybrid models has put Nissan in a difficult position.
If the combined entity materializes, it will face challenges related to the integration of two large and very different corporations. Their cultures are very different, and this could create problems as they start working together closely.
“If they can effectively manage what they need to share and work together and what needs to be different, I think it is possible for them to succeed,” Osanai said.