Honda and Nissan have announced that they have merged to create the world’s third largest automaker.
Japanese automakers Honda and Nissan have announced plans to work on a merger that would create the world’s third-largest automaker by sales as the industry undergoes dramatic shifts away from fossil fuels.
The two companies said they signed a memorandum of understanding on Monday, and smaller Nissan alliance member Mitsubishi Motors also agreed to join talks on integrating their businesses.
Automakers in Japan have outpaced their big rivals in electric vehicles, and newcomers such as China’s BYD and US market leader Tesla are scrambling to cut costs and make up for lost time as they eat up market share.
Honda president Toshihiro Mibe said that Honda and Nissan will continue to integrate their operations under a joint holding company. Honda will initially lead the new management while maintaining the principles and brands of each company.
They aim to reach a formal merger agreement by June and to complete the deal and list the holding on the Tokyo Stock Exchange by August 2026, he said.
According to Mibe, no dollar value has been given and official negotiations are just beginning. “There are points to be studied and discussed,” he said. Frankly, the probability of this not being implemented is not equal to zero.
The Japanese government has been sounding the alarm about the current threat to China’s auto industry since at least 2019. reported He urged Honda and Nissan to meet and discuss a potential consolidation.
China’s automotive sector has seen an increase in exports with one industry group in the last few years claims It said it will overtake Japan as the world’s largest car exporter in 2023.
A combination of Honda, Nissan and Mitsubishi could be worth more than US$50 billion based on the market capitalization of all three automakers.
Together, the companies will gain the scale to compete with Toyota and Germany’s Volkswagen. Toyota has technology partnerships with Japan’s Mazda and Subaru.
Planned merger ‘a desperate move’
News of a possible merger emerged earlier this month, with unconfirmed reports that Taiwanese iPhone maker Foxconn has sought to link up with Nissan by buying a stake in France’s Renault, the Japanese company’s other alliance partner.
Nissan CEO Makoto Uchida said that his company had not received a direct approach from Foxconn. He also admitted that Nissan’s situation is “difficult”.
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Even after the merger, Toyota will remain Japan’s leading automaker, producing 11.5 million vehicles in 2023. If they join, the three small companies will produce about eight million cars. In 2023, Honda produced four million and Nissan produced 3.4 million. Mitsubishi Motors won just over a million.
Nissan, Honda and Mitsubishi have previously agreed to share components for electric vehicles, such as batteries, and jointly research software for autonomous driving to better adapt to electrification.
Nissan has struggled since the scandal that began in late 2018 with the arrest of former chairman Carlos Ghosn on charges of fraud and misappropriation of company assets. He was eventually released on bail and fled to Lebanon.
Speaking to reporters via video link in Tokyo on Monday, Ghosn derided the planned merger as a “desperate move.”
Nissan has years of experience in the production of batteries, electric vehicles
From Nissan, Honda could buy large truck-based SUVs like the non-Honda Armada and the Infiniti QX80, with big towing capacity and good off-road performance, Sam Fiorani, vice president of AutoForecast Solutions, reported the Associated Press. .
Nissan also has years of experience in producing batteries and electric vehicles and gas-electric hybrid powertrains that could help Honda develop its electric vehicles and next-generation hybrids, he said.
But the company said in November it was cutting global production capacity by 20 percent after reporting 9,000 job cuts, or about six percent of its global workforce, and a quarterly loss of 9.3 billion yen (about Cdn 85 million).
It recently reshuffled its leadership and CEO Uchida took a 50 percent pay cut, admitting responsibility for the financial woes, saying Nissan needed to be more efficient and better respond to market tastes, rising costs and other global changes.
“We expect that if this integration takes place, we will be able to provide even greater value to a broader customer base,” Uchida said.
Fitch Ratings recently downgraded Nissan’s credit outlook to “negative,” citing deteriorating profitability in part due to price cuts in the North American market. But it noted that it has a strong financial structure and solid cash reserves of 1.44 trillion yen (Cdn13 billion).
The merger reflects a trend toward consolidation in the industry
The price of “Nissan” shares has fallen to such an extent that it is considered a bargain. Its shares traded up 1.6 percent in Tokyo on Monday. They rose more than 20 percent last week after news of a possible merger broke.
Honda shares rose 3.8 percent. Honda’s net profit fell nearly 20 percent from a year ago in the first half of the April-March fiscal year due to lower sales in China.
The merger reflects a trend toward consolidation in the industry.
At a regular briefing on Monday, Cabinet Secretary Yoshimasa Hayashi said he would not comment on the details of the automakers’ plans, but said Japanese companies needed to remain competitive in a rapidly changing market.
“As the business environment surrounding the automotive industry changes greatly, and as competitiveness in battery cells and software become increasingly important, we expect the necessary measures to be taken to survive international competition,” Hayashi said.
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