Japanese automakers Honda and Nissan will attempt to merge and create the world’s third-largest automaker by sales, as the industry undergoes dramatic changes as it transitions away from fossil fuels.
The two companies said they had signed a memorandum of understanding on Monday and that Mitsubishi Motorsa smaller member of the Nissan alliance, had also agreed to join talks to integrate their businesses. Honda will initially lead the new administration, maintaining the principles and brands of each company.
He Rise of Chinese automakers is shaking up the industry at a time when manufacturers are struggling to transition from fossil fuel-powered vehicles to electrical. Relatively inexpensive electric vehicles from China BYD, Great Wall y Nio They are eating into the market shares of American and Japanese car companies in China and elsewhere.
Los Japanese automakers have fallen behind their big rivals in electric vehicles and now they are trying to cut costs and make up for lost time.
Nissan, Honda y Mitsubishi announced in August that they would share electric vehicle components, such as batteries, and jointly research software for autonomous driving to better adapt to dramatic changes in the auto industry focused on electrification. In March a preliminary agreement was announced between HondaJapan’s second largest automobile manufacturer, and Nissanthe third largest.
A merger could result in a giant worth approximately $55 billionbased on the market capitalization of the three automakers.
Joining forces would help smaller Japanese automakers gain scale to compete with the Japanese market leader Toyota Motor Corp. and with the German Volkswagen AG.
Toyota itself has technological alliances with Mazda Motor Corp. and Subaru Japan Corp.
Nissan has large body-on-frame SUVs based on trucks, like the Armada and Infiniti QX80, which Honda doesn’t have, with big towing capacities and good off-road performance, said Sam Fiorani, vice president of AutoForecast Solutions.
Nissan also has years of experience in building batteries and electric vehiclesand gas-electric hybrid powertrains that could help Honda develop its own electric vehicles and the next generation of hybrids, he said.
“Nissan has some product segments that Honda does not currently participate in”and a merger or partnership could help, said Sam Abuelsamid, a Detroit-area auto industry analyst.
Although electric models Leaf y That’s it Nissan vehicles have not sold well in the United States, they are solid vehicles, Fiorani said. “They have not rested on their laurels and have been developing this technology,” he said. “They have new products on the way that could provide a good platform for Honda for its next generation.”
Nissan said last month that he was eliminating 9,000 jobsor about 6% of its global workforce, and reducing global production capacity by 20% after reporting a quarterly loss of 9.3 billion yen ($61 million).
Earlier this month, the company reshuffled its management and CEO, Makoto Uchidaaccepted a 50% pay cut to take responsibility for the financial problems, stating that Nissan needed to be more efficient and more responsive to market tastes, rising costs and other global changes.
Fitch Ratings recently downgraded Nissan’s credit outlook to “negative,” citing worsening profitability, in part due to price cuts in the North American market. But it noted that it has a sound financial structure and strong cash reserves that amounted to 1.44 trillion yen ($9.4 billion).
Nissan’s share price has fallen to the point where it is considered a bargain. A report by Japanese financial magazine Diamond said talks with Honda gained urgency after Taiwanese iPhone maker Hon Hai Precision Industry Co., better known as Foxconn, began exploring a possible acquisition of Nissan as part of its foray into the electric vehicle sector.
The company has been in trouble for years after a scandal that began with the arrest of its former president Carlos Ghosn in late 2018 on charges of fraud and misuse of company assets, allegations he denies. He was eventually released on bail and fled to Lebanon.
Honda reported that its profits fell almost 20% in the first half of the April-March fiscal year compared to the previous year, because sales suffered in China.
Toyota made 11.5 million vehicles in 2023, while Honda made 4 million and Nissan produced 3.4 million. Mitsubishi Motors manufactured just over 1 million. Even after a merger, Toyota would remain the leading Japanese automaker.
Every automaker in the world faces potential shocks if President-elect Donald Trump follows through on his threats to raise or impose tariffs on imports of foreign goods, including from allied countries like Japan and neighbors like Canada and Mexico. Nissan is one of the major automotive companies that have adjusted their supply chains to include vehicles assembled in Mexico.
Meanwhile, analysts say an industry-wide “affordability shift” is occurringled by people who feel they can’t afford to pay nearly $50,000 for a new vehicle. In the United States, a vital market for companies such as Nissan, Honda and Toyota, that is forcing automakers to consider reduce priceswhich will further reduce industry profits.
(with information from AP)
