Posted on 12/18/2024 9:25:51 AM PST by Red Badger
Key Points
* Top Japanese carmakers Nissan Motor and Honda Motor are understood to be exploring a blockbuster merger, as the two rival companies seek to stay competitive on the road to full electrification.
* It is thought the prospective tie-up could create the world’s third-largest auto group by vehicle sales, with 8 million sales annually, according to Citi.
* The merger report comes at a time when many auto giants are struggling to cope with increased global competition from bigger EV makers such as Tesla and China’s BYD.
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Top Japanese carmakers Nissan Motor and Honda Motor are understood to be exploring a blockbuster merger, sending shock waves through the global automotive industry as the two rival companies seek to stay competitive on the road to full electrification.
Nissan and Honda are planning to enter into negotiations for a merger, Japanese business newspaper Nikkei reported overnight, citing sources close to the matter and noting that the domestic peers expected to sign a memorandum of understanding shortly. The two companies will also reportedly look to bring Mitsubishi Motors, in which Nissan is the top shareholder with a 24% stake, 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 place Nissan-Honda-Mitsubishi behind fellow Japanese automaker Toyota Motor and Germany’s crisis-stricken Volkswagen, respectively.
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 bigger electric vehicle makers such as Tesla and China’s BYD.
Nissan and Honda previously forged a strategic partnership in March to collaborate on producing key components for EVs.
A megamerger, however, is expected to face several obstacles. Analysts have expressed concerns about the likelihood of political scrutiny in Japan, given the potential for job cuts if a deal pushes through, while the unwinding of Nissan’s alliance with French vehicle manufacturer Renault is regarded as pivotal to the process.
Peter Wells, professor of business and sustainability at Cardiff Business School’s Centre for Automotive Industry Research, described the reported merger as a “really important” development — one that could help Nissan and Honda pool their assets, save money on costs and create the technologies they need for the future.
“There’s been a lot of speculation about the position of Nissan over the past 12 months or so. It’s been trying to equalize or balance out 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 line-up. There are so many warning signs, so many red flags around Nissan at the moment that something had to happen,” he added. “Whether this is the answer is another question.”
Shares of Nissan soared almost 24% on Wednesday, notching the firm’s best trading day in at least 40 years, according to data firm FactSet. The firm’s Tokyo-listed stock price remains nearly 25% lower year to date.
Honda shares, meanwhile, slipped over 3% in New York.
Barriers to a possible merger
Asked whether consolidation between Nissan and Honda could emerge as a good recourse to combat the competition from Chinese EV carmakers, Cardiff Business School’s Wells said the deal could be characterized as “a traditional solution.”
“My concerns would be that perhaps they have left it a bit late, that they don’t have the current technology and set-up [or] the right product to compete in their key markets,” Wells said.
“For Nissan particularly, they are out of step with the U.S. market. That’s their major concern, and they cannot fix that very quickly,” he added.
JPMorgan’s Akira Kishimoto shared similar views on some of the barriers to a prospective Nissan-Honda merger, saying “the hurdles to overcome would be high.”
“At a minimum, we think Nissan needs to clarify where its particularly complex capital relationship with Renault, which involves the French government, will end up and also provide details on the restructuring proposal it announced,” Kishimoto said in a research note published Wednesday.
“We think Honda needs to show how it will manage major [battery electric vehicles] and battery investments in Canada,” Kishimoto said.
JPMorgan said it would now need to wait for any concrete announcements from either company.
‘Full-scale transformation of the auto industry’
“This tie-up is not entirely unexpected because obviously they announced their partnership earlier this year,” Lucinda Guthrie, executive editor at Mergermarket, told CNBC’s “Street Signs Europe” on Wednesday.
“Some of the reports I’ve seen claim that this came about as a result of Foxconn making an approach to Nissan. Now, with this particular transaction, I question whether it is going to be a hardcore merger or whether it is going to be more of a partnership,” she added.
Apple
supplier Foxconn approached Nissan about taking a stake, Bloomberg reported Wednesday, citing an unnamed source. The Taiwan-based company has been investing heavily in EVs in recent years. CNBC has contacted Foxconn for comment.
Echoing the latest development, Honda recently tested the water over a partnership with General Motors, before ultimately deciding to walk away.
Speculation over consolidation between Honda and Nissan could follow a similar trajectory, Guthrie said.
“You have to bear in mind that this would have to come with the Japanese government’s blessing because there is the potential for workforce cuts but then, how are the Japanese automakers going to compete with the low-cost vehicles from China?” Guthrie said.
Citi’s Arifumi Yoshida said a merger would likely have a negative impact for Honda, but a positive one for Nissan and Mitsubishi.
“Given Honda’s competitiveness in motorcycles and [hybrid electric vehicles] and the strength of its brand, we believe it is positioned to take on rivals for the next 5-10 years,” Yoshida said in a research note published Wednesday.
Yoshida nevertheless said the decision could be viewed as one made “in anticipation of the full-scale transformation of the auto industry.”
— CNBC’s Michael Wayland contributed to this report.
Less jobs?
DITTO
CVT transmissions, WHY? WHY? WHY?
WHat junk!!!!
You see things as I do. The current flock of automaker CEO’s have got to be the stupidest group of people on the planet. An excerpt from a post of mine the other day:
++++++++++
Time will tell truth. All the companies sucking ass are the ones that went “all-in” on the EV boon-doggle. Everyone of these companies that tooled (mortgaged) their future on EV’s is paying the piper. The EV market has been saturated by the folks that must have the next best thing. Many of these first time EV owners are right back to buying an ICE vehicle.
Toyota has the right idea. Hybrid makes sense. It works. Prius Hybrid has been in production since 2012. The smartest company in the world does not go “all-in” on the plug-in EV hysteria and they are the ones behind the curve?
My money is on Toyota as that company is still run by Engineers. Like Boeing used to be.
The road to electrification is a fine road to take, go slow and stay on the right so as not to block ICE cars passing. Take your time, build necessary infrastructure, improve EV’s and progress over the coming decades.
A$$wipes will never give up.
With global CEO weenie Tavares gone and “Mopar Jesus” Tim Kuniskis back, maybe it isn’t too late, and Chrysler Ram Jeep Dodge can bounce back. Heard they are going to be ramping up production of the Hellcat engine. The Trump election may have saved the brand from intentional destruction.
I had been considering a Subaru Crosstrek, but all Subarus now have CVTs. No sale.
ISWYDT!...................
My Toyota has more American parts and is built in Kentucky rather than the foreign made ford/chevy with Mexican/ Canadian made parts/cars.
That's exactly what my mechanic told me years ago. He said they only come in for required PA inspection and except for tires, brakes and oil change - they need nothing.
Been driving a bullet-proof Toyota for 12 years. Wife's Jeep - not so much. Had to replace Jeep's transmission at 125K. Ouch!
Sad that they want to pursue total electric cars. Only the rich will be able to afford to drive. I guess that’s what they want.
They want us to be able to drive only the distance of one half charge from home............
I had to put about $3500 into a used Lexus I bought, but the mechanic told me that even at 182,000 miles, I can expect 182,000 more... without major repairs.
A Lexus is basically a fancy Toyota.
I had to look for a “new” car in 2023 then again after that car that I purchased in 2023 was totaled by a hit and run this past summer. Both times I stuck with Honda. 2009 then 2013 CRVs. Upon doing research I learned to avoid the CVTs. I totally scratched Subarus and Nissans off my list.
It’s hard to find a Lexus out there because the owners keep them forever.
I've put 6 digits of mileage each on two Corollas with CVT. One of them is still going, and I expect it to keep going for a long time. The other one ... Odocoileus virginianus decided that I didn't need that car any more. The tranny probably got stripped out and sold on the used-parts market. Insurance paid nicely on the wreck, so I really don't care.
Yep. That’s what I came to realize myself.
My take! Hondas are great. Nissons suck. So once United you’ll end up buying a mediocre auto/suv.
Mitsubishis are cheap...........
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