Makoto Uchida (left), CEO of Nissan Motor, listens to Toshihiro Mibe (right), CEO of Honda Motor, at a joint press conference on March 15, 2024 in Tokyo, Japan.
Tomohiro Ohsumi | Getty Images News | Getty Images
Top Japanese car manufacturers Nissan engine And Honda engines are understood as an exploration of a Blockbuster mergersending shockwaves through the global automotive industry as the two rival companies attempt to remain competitive in the market Path to complete electrification.
Nissan and Honda plan to begin merger negotiations, the Japanese business newspaper reports Nikkei reported overnight, citing sources familiar with the matter, noting that domestic counterparts were expected to sign a memorandum of understanding shortly.
According to Citi, the proposed merger could create the world’s third-largest auto company by vehicle sales, with 8 million sales per year. This would put Nissan-Honda-Mitsubishi behind other Japanese car manufacturers Toyota engine and Germany crisis-ridden Volkswagenrespectively.
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 increasing global competition from larger electric vehicle makers such as Tesla and China’s BYD.
Previously Nissan and Honda forged a strategic partnership in March to collaborate on the production of key components for electric vehicles.
However, a mega-merger is likely to face several obstacles. Analysts have raised concerns about the likelihood of political scrutiny in Japan, given the possibility of job cuts if a deal goes through while Nissan’s alliance with the French carmaker is dissolved Renault is considered central to the process.
Peter Wells, professor of economics and sustainability at Cardiff Business School’s Center for Automotive Industry Research, described the reported merger as a “really important” development – one that could help Nissan and Honda combine their assets, save costs and the To develop technologies that they will need for the future.
“There has been a lot of speculation about Nissan’s position over the last 12 months or so. The company tried to equalize or balance its relationship with Renault, but it struggled,” Wells told CNBC.Street signs Europe” on Wednesday.
“It’s struggling in the market, it’s struggling at home, it doesn’t have the right product range. There are so many warning signs right now, so many red flags around Nissan that something had to happen,” he added. “Whether that’s the answer is another question.”
Nissan shares rose 23.7% on Wednesday, outperforming the company best trading day in at least 40 yearsaccording to the data company FactSet. The company’s Tokyo-listed share price is still nearly 25% lower year-to-date.
Honda shares, meanwhile, fell 3.2% in premarket trading in New York.
Obstacles to a possible merger
Asked whether consolidation between Nissan and Honda could prove to be a good way to combat competition from Chinese electric car makers, Cardiff Business School’s Wells said the deal could be described as a “traditional solution”.
“My concern is that they may have left it a little too late, that they don’t have the current technology and (or) bring the right product to market to be competitive in their key markets,” Wells said.
“Particularly at Nissan, they are out of sync with the U.S. market. That’s their biggest concern and they can’t fix it quickly,” he added.
Employees work on the assembly line of new energy vehicles at a factory of Chinese electric car startup Leapmotor in Jinhua, Zhejiang province of China, April 1, 2024.
Vcg | Visual China Group | Getty Images
JPMorgan‘s Akira Kishimoto expressed similar views on some of the obstacles to a potential Nissan-Honda merger, saying: “The hurdles to overcome would be high.”
“We believe Nissan needs to at least clarify where its particularly complex capital relationship with Renault, in which the French government is involved, will end, and also provide details on the announced restructuring proposal,” Kishimoto said in a research note published on Wednesday.
“We believe Honda needs to demonstrate how it will manage large (battery electric vehicles) and battery investments in Canada,” Kishimoto said.
JPMorgan said it would now have to wait for concrete announcements from the two companies.
“Comprehensive transformation of the automotive industry”
“This merger is not entirely unexpected as they obviously announced their partnership earlier this year,” Lucinda Guthrie, editor-in-chief at Mergermarket, told CNBC’s “Street Signs Europe” on Wednesday.
“Some of them Reports I’ve seen claims that this is due to this Foxconn make an approach to Nissan. “This particular transaction makes me wonder whether it will be a hardcore merger or more of a partnership,” she added.
Apple supplier Foxconn approached Nissan about a stake, Bloomberg reported on Wednesday, citing an unnamed source. The Taiwan-based company has invested heavily in electric vehicles in recent years. CNBC has reached out to Foxconn for comment.
Following the latest development, Honda recently tested the waters of a partnership with General Motorspreviously ultimately he decides to walk away.
Speculation about a consolidation between Honda and Nissan could follow a similar path, Guthrie said.
“It must be remembered that this must be done with the blessing of the Japanese government as there is a possibility of staff reductions. “But how are the Japanese automakers supposed to compete with the low-cost vehicles from China?” Guthrie said.
Nissan signage at a dealership in Richmond, California, USA, on Friday, June 21, 2024.
Bloomberg | Bloomberg | Getty Images
Citi’s Arifumi Yoshida said a merger would likely have negative effects for Honda but positive ones for Nissan and Mitsubishi.
“Given Honda’s competitiveness in motorcycles and (hybrid electric vehicles) and the strength of its brand, we believe the company has the ability to compete over the next five to 10 years,” Yoshida said in a statement released Wednesday Research note.
Still, Yoshida said the decision could be viewed as one made “in anticipation of the comprehensive transformation of the automobile industry.”
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