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.
P
CVT transmissions are on my dealbreaker list should I decide to replace my ‘03 Civic with 206K. Another would be any engine with wet timing belts, an engineering idiocy, as many owners are finding out. Third would be any car with touchscreens. I love my i pad, but it doesn’t belong on a dashboard. The Civic may very well be the last car I ever own.
Bad deal for Honda, Nissan is a train wreck. Merger would be a total failure.
The real problem is excess manufacturing capacity.
VW is over $240 Billion Debt and is trying to downsize. Same with Mercedes.
The U.S. has effectively destroyed the German Manufacturing sector with it’s sanctions on Russian and blowing up the Nordstream Pipeline preventing Germany from getting the Cheap energy they need and at the same time we are putting the breaks on supplying them LNG which is more expensive.
To pay for that infrastructure will be Trillions of dollars and no one can afford it.
I agree on the touch screens, but good luck avoiding them. Just bought a 6 year old RAV4 for my wife, and it has one. I have only driven it a few times to put air in the tires and gas in the tank, but so far I have found the screen pretty easy to ignore. Love the RAV4 by the way.
This likely means tinny, junky and unreliable Hondas. Oh, I forgot rust. Nissans always rusted faster than any other Japanese brand… at least in Pennsyltucky.
2011 CR-V with 91 K. Been paid off for A LONG TIME. Last Honda I had a 93 Del Sol all tricked out in Chrome yellow with 3 coats of clear coat with 198K before I sold it to a kid that wanted it more than me. That car here in Florida would have been the ticket. Just do preventive maintenance and it will be last car I own unless Trump comes thru.
What happens when national mandates brings EVs up to 10% ? Up to 25% ?
I’ve been driving diesels (sedans) since 2009. You can’t buy a new diesel sedan in this country now. Mine is 6 years old with 50,000 miles.
Everyone gets a blackout!......
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