Automotive Industry Shake-Up: Nissan and Honda Explore Merger
In a move that could reshape the global automotive landscape, Japanese giants Nissan and Honda have announced official talks to merge, creating the world’s third-largest automaker by sales. The proposed deal aims to address the intense competition in the electric vehicle (EV) market and the high cost of transitioning to EV technology.
Scale and Synergies
According to Honda CEO Toshihiro Mibe, the merger would provide the companies with the necessary scale to compete in the development of new technologies, including electric vehicles and intelligent driving. By sharing intelligence and resources, the integrated entity would deliver economies of scale and synergies while protecting both brands.
Financial Projections
The merged group has the potential to generate revenue of 30 trillion yen ($191.4 billion) and operating profit of over 3 trillion yen. Honda reported 1.382 trillion yen in operating profit in the full-year to March 2024, while Nissan’s operating profit stood at 568.7 billion yen.
Structure and Timeline
A holding company would be formed as the parent company of both Honda and Nissan, listed on the Tokyo Stock Exchange. Honda would nominate most of the integrated entity’s board members. Discussions are set to conclude in June 2025, with the integration expected to be a mid to long-term project that may not show visible progress until 2030 and beyond.
Industry Context
The proposed merger comes as the automotive industry faces intense global competition, particularly from Tesla and China’s BYD. The high cost of the EV transition has long been expected to drive industry consolidation. Japan’s Toyota is currently the world’s biggest automaker by sales, followed by Germany’s Volkswagen.
Nissan’s Struggles
Nissan has been struggling in the market, with a lackluster product line-up and financial underperformance. The company recently announced plans to cut 9,000 jobs and reduce global production capacity by a fifth. The proposed merger is seen as a result of Nissan’s struggles and the restructure of its partnership with France’s Renault.
Reaction and Analysis
Analysts believe the potential tie-up is a necessary step for Nissan’s survival, while Honda CEO Mibe emphasized that the merger is “based on the assumption that Nissan completes its turnaround action.” Peter Wells, professor of business and sustainability at Cardiff Business School’s Centre for Automotive Industry Research, noted that Nissan’s struggles have been evident for some time, and the merger may be the company’s best option for future growth.
Leave a Reply