It Was Inevitable—Honda And Nissan Start Merger Talks

3 hours ago

Forbes

Makoto Uchida (L), Nissan CEO shakes hands with Toshihiro Mibe (R), president of Honda, following a ... [+] press conference in Tokyo on August 1, 2024. (Photo by Richard A. Brooks / AFP) (Photo by RICHARD A. BROOKS/AFP via Getty Images)

AFP via Getty Images

On November 30, I wrote about Nissan’s financial troubles and the fact that Honda might enter merger talks to save Nissan from bankruptcy. Well the discussions have just commenced according to a major local news source.

Yesterday in Tokyo, the Nikkei newspaper reported that Honda and Nissan are understood to have started exploratory talks about a potential merger to save the ailing Nissan, be expanded to include Mitsubishi Motors, and help the three firms compete against electric vehicle (EV) makers, mainly those from China. While Honda and Nissan declined to confirm Tuesday’s report, both automakers, as well as Mitsubishi, issued statements that focused on their previous agreements for further future collaboration.

In March 2024, the two automakers agreed to co-develop a strategic EV partnership, and then in August, they strengthened their ties by agreeing to co-develop batteries and other related technologies.

The Nikkei article stated that the two major Japanese carmakers—No 2 and No 3 respectively (behind Toyota of course)—plan to sign a memorandum of understanding to discuss shared equity stakes in a new holding company under which the combined company would operate.

Honda and Nissan plan to leverage mutual strengths

In not denying the Nikkei story, the two car companies replied to Forbes by saying that "As announced in March of this year, Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other's strengths.”

News of the potential merger comes as numerous carmakers struggle with growing competition as powertrains shift from gasoline and diesel to electric, with production booming in China.

BRUSSELS, BELGIUM - JANUARY 13: Nissan Ariya electric crossover SUV on display at Brussels Expo on ... [+] January 13, 2023 in Brussels, Belgium. (Photo by Sjoerd van der Wal/Getty Images)

Getty Images / Sjoerd van der Wal

A Honda-Nissan deal, with the potential to add Mitsubishi to the mix, would form a bonafide rival to Toyota that would create one of the world’s top three carmaking alliances and split the Japanese industry into two camps. In response the the positive news, Nissan shares jumped by 23% in Tokyo on Wednesday while Mitsubishi’s rose by 20% and Honda’s fell by about 3%.

Honda and Nissan are expected to officially confirm that they have commenced exploratory talks as early as next week, according to TBS, a major Japanese TV network.

Nissan was EV pioneer with Leaf

Although both companies offer hybrids, EVs and plug-ins – Nissan was the pioneer in EV technology when it debuted the Leaf in 2011. As of 2024 however, Chinese brands like BYD, Geely, SAIC and Chery have surpassed Japanese EV technology and are priced significantly cheaper.

The two car brands had combined global sales of 7.4 million units in 2023, but had to confront tough competition from Chinese manufacturers such as BYD, which recorded soaring quarterly revenues, overtaking Tesla for the first time in October.

But let’s face the elephant in the room. Even if Honda and Nissan do merge, will their combined technologies and product lineup be competitive enough to take on China and for that matter Tesla and others? Even though Nissan currently has three EVs on sale—the Ariya SUV, the Leaf and the Sakura minicar—its popular (in Japan) e-Power hybrid tech has been slow to catch on internationally while Honda’s very modest EV program—with only one Prologue EV—has struggled to keep pace with other major brands.