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.
The road to electrification is the road to perdition.
My experience with Hondas and Toyotas is that they never need to go in for service.
The road to electrification will destroy both brands
Agreed.
They will have to Pry my cold
Dead hands from my F250 gasser!
The “EV Mandate” will go away for the next 4 and possibly the next 12 years.
By then, we will hopefully be over the obsession with Climate change hoax and the push for electric cars.
Only time will tell.
Huge relief, my next vehicle (if I have one) is going to be the Nissan Kicks.
The EV/Green Agenda push will end when the Global promoters no longer get TAXPAYER forced subsidies, which is the only way they made money on the scam.
I have a 2010 Honda Pilot with 95k miles that runs fine I am a senior citizen and it’s my last car if it dies i switch to uber and get an electric trike screw you idiots. EV’s will never take over the market
LEX
My experience with Hondas has likewise been very good, but they do have some well-known flaws: (1) the door locks and ignition locks wear out too quickly and need to be replaced, (2) their air conditioning compressors are garbage, failing and contaminating the entire air-conditioning system, (3) the electrical systems, including headlight switches and window motors are prone to failing, and (4) window regulators fail predictably.
Nissan and Mitsubishi will fix that..........
That CVT transmission is crap.................
If Nissan is still involved with Renault, Honda better dump that part or it will drag Honda down. Honda is too good to be associated with Renault.
Basic maintenance that a person can do themselves generally is all they need.
I used to be an “American” brand car buyer only, until I finally realized they weren’t as American as I thought, so I went with quality about 15 years ago. Haven’t regretted it 1 bit.
Newer Hondas are not as good as the older ones. We have them in regularly for a lot of random issues. Still better choice then any other except toyota
Mitsubishi and Nissan will be a millstone to kill Honda.
There is seemingly nobody less competent about anything than the modern day global CEO. The “struggling” number auto maker VW. Hello, they are struggling cause they make crap and now they are all in on EV. MB and BMW announced earlier this year they are not going away with IC cars. The only major company that is running away with sales is the only manufacturer that rejects the stupid 100% EV scam , that is Toyota, who has made the best selling car in the world all hybrid, the Camry. These idiot CEO followers are all clueless. Now that Hondas founders are all gone, they are going down the crap hole too. Honda is Honda cause they do things their own way. They don’t merge with and buy losers. Nissan has been given 12-18 months to live. Nissan is an anvil that will drown Honda. What idiot would have anything to do with a French or Italian auto company. Chrysler soon to be history with stellcluless running its show. If it wasn’t for a small subset of guys who love Ram trucks or lesbos who have money to burn to buy Jeeps, there wouldn’t be a Chrysler either.
You’ve hit the nail on the head. Those are the most common issues we see on the newer hondas. 2015+. Not so much on the older ones though.
It’s not just them, Ford has lost billions dealing with EV mandates.
We need a battery that can charge as fast as you can fill a car with gas, that doesn’t need to be replaced and doesn’t catch fire.
Until that’s done EV’s shouldn’t be forced.
Sell Mortimer sell.
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