Nissan Motor CEO Makoto Uchida (L) listens to Honda Motor CEO Toshihiro Mibe (R) during a joint press conference on March 15, 2024 in Tokyo, Japan.
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Major Japanese automakers Nissan Motor and Honda Motors It is understood that they are exploring successful mergersending shockwaves through the global auto industry as two rival companies look to remain competitive the path to complete electrification.
Nissan and Honda plan to start merger talks, Japanese business daily Nikkei he reported overnight, citing sources on the matter and stating that members of the house expected to sign a memorandum of understanding soon. The two companies will also seek to bring Mitsubishi Motors, which owns a 24% stake in Nissan’s main shareholder, into the deal.
The prospective tie-up could create the world’s third-largest auto group by vehicle sales, with 8 million sales annually, according to Citi. That would put it behind Japanese automakers Nissan-Honda-Mitsubishi Toyota Motor and that of Germany hit by crisis Volkswagenrespectively
In similar statements, Nissan and Honda neither confirmed nor denied the Nikkei report.
The merger report comes at a time when many auto giants are struggling to cope with increased global competition from big electric vehicle makers. Tesla and China’s BYD.
Before Nissan and Honda forged strategic partnership in March to cooperate in the production of key components for electric vehicles.
A megamerger, however, is expected to face several obstacles. Analysts have expressed concern over the possibility of political scrutiny in Japan, given the possibility of job cuts if a deal goes ahead as its alliance with French vehicle maker Nissan unravels. Renault it is considered essential to the process.
Peter Wells, professor of business and sustainability at Cardiff Business School’s Center for Automotive Industry Research, described the announced merger as a “really important” development, one that could help Nissan and Honda combine their assets, save money on costs and create technologies. need for the future
“There’s been a lot of speculation over the last 12 months or so about Nissan’s position. It’s trying to equalize or balance its relationship with Renault, but it’s been struggling,” Wells told CNBC’s “Street signs Europe“on Wednesday.
“It’s been struggling in the market, it’s been struggling at home, it doesn’t have the right product range. There are so many warning signs, so many red flags around Nissan right now, that something had to happen,” he said. add “The answer is this is another question.”
Nissan shares rose nearly 24% on Wednesday, undercutting the company Best trading day in at least 40 yearsaccording to data firm FactSet. The Tokyo stock price remains nearly 25% lower year-to-date.
Honda shares, meanwhile, fell more than 3% in New York.
Possible obstacles to a merger
Asked whether a consolidation between Nissan and Honda could be a good way to deal with competition from Chinese EV carmakers, Cardiff Business School’s Wells said the deal was “a traditional solution”.
“My concern would be that maybe they’ve left it a little late, they don’t have the current technology and the right setup (or) product to compete in their core markets,” Wells said.
“For Nissan in particular, they’re out of step with the US market. That’s their main concern, and they can’t fix that very quickly,” he added.
Workers work on the assembly line of new energy vehicles at a factory of Chinese EV company Leapmotor on April 1, 2024 in Jinhua, China’s Zhejiang province.
Vcg | Visual China Group | Getty Images
JPMorgan’s Akira Kishimoto shared similar views on some of the obstacles to a potential Nissan-Honda merger, saying “the hurdles to overcome would be huge.”
“At the very least, we believe Nissan needs to clarify where its particularly complex equity relationship with Renault, which involves the French government, will end, and also provide details on its announced restructuring proposal,” Kishimoto said in a research note published on Wednesday. in one
“We think Honda needs to show how they will manage (battery electric vehicles) and battery investments in Canada,” Kishimoto said.
JPMorgan said it would now have to wait for any specific announcements from the companies.
“Full-scale transformation of the automotive industry”
“This tie-up is not entirely unexpected, of course, as they announced their partnership earlier this year,” Lucinda Guthrie, executive editor of Mergermarket, told CNBC’s “Street Signs Europe” on Wednesday.
“Some the reports I have claimed that it arose as a result Foxconn Making an approach to Nissan. Now, with this particular transaction, I doubt whether it will be a hard merger or more of a partnership,” he added.
the apple Supplier Foxconn has approached Nissan about taking a stake, Bloomberg reported on Wednesday, citing an unnamed source. The Taiwan-based company has been investing heavily in EVs in recent years. CNBC has reached out to Foxconn for comment.
Echoing the latest development, Honda has recently tested the water through a partnership with General Motorsbefore he finally decides to leave.
Speculation about a merger between Honda and Nissan could follow a similar path, Guthrie said.
“You have to bear in mind that this would have to come with the blessing of the Japanese government because of the possibility of layoffs, but then how will Japanese automakers compete with low-cost Chinese vehicles?” Guthrie said.
Nissan signage at a dealership in Richmond, California, USA, on Friday, June 21, 2024.
Bloomberg | Bloomberg | Getty Images
Citi’s Arifumi Yoshida said a merger would likely have a negative impact on Honda, but a positive one on Nissan and Mitsubishi.
“Given Honda’s competitiveness in motorcycles and (hybrid electric vehicles) and its brand strength, we believe it is poised to take on rivals over the next 5-10 years,” Yoshida said in a research note published Wednesday.
However, Yoshida said the decision could be viewed as a “prediction of the full-scale transformation of the auto industry.”
– CNBC’s Michael Wayland contributed to this report.
