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Nissan Motor CEO Makoto Uchida (L) listens as Honda Motor CEO Toshihiro Mibe (R) attends a joint press conference on March 15, 2024 in Tokyo, Japan.
Tomohiro Ohsumi Getty Images News | Getty Images
The best Japanese car manufacturers Nissan Motor and Honda Motors are meant to be exploration a blockbuster fusionsending shockwaves through the global auto industry as the two rival companies try to stay competitive on the road to complete electrification.
Nissan and Honda plan to enter negotiations for a merger, Japanese business newspaper Nikkei reported overnight, citing sources close to the matter and noting that domestic peers expected to sign a memorandum of understanding soon. The two companies will also seek to bring Mitsubishi Motors, in which Nissan is the main shareholder with a 24% stake, into the deal.
The prospective link could create the world’s third largest automobile group by vehicle sales, with 8 million sales per year, according to Citi. That will put Nissan-Honda-Mitsubishi behind its fellow Japanese automaker Toyota engine and Germany crisis strikes Volkswagenrespectively.
In similar statements, Nissan and Honda neither confirmed nor denied the Nikkei report. The next day reported that talks could start next week.
The merger report comes at a time when several auto giants are struggling to cope with increased global competition from larger electric vehicle makers such as Tesla and China’s BYD.
Nissan and Honda first forged a strategic partnership in March to collaborate on the production of key components for EVs.
However, a megamerger is expected to face several obstacles. Analysts have raised concerns about the likelihood of political scrutiny in Japan, given the potential for job cuts if a deal goes through, while Nissan’s alliance with the French automaker thaws. Renault is considered pivotal to the process.
Peter Wells, professor of business 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 money on costs and create the technologies they have. need for the future.
“There’s been a lot of speculation about Nissan’s position over the last 12 months or so. It’s been trying to equalize or balance its relationship with Renault, but it’s been a struggle,” Wells told CNBC.Road signs in Europe“Wednesday.
“It was fought in the market, it was fought at home, it didn’t have the right product line. There are so many warning signs, so many red flags around Nissan at the time that something was going to happen,” he. added “If this is the answer is another question.”
Nissan shares rose nearly 24% on Wednesday, beating those of the firm the best trading day in at least 40 yearsaccording to data company FactSet. The company’s stock price in Tokyo remains nearly 25% lower year to date.
Honda shares, meanwhile, fell more than 3% in New York.
Obstacles to a possible merger
Asked whether the consolidation between Nissan and Honda could emerge as a good resource to fight competition from Chinese EV makers, Cardiff Business School’s Wells said the deal could be characterized as “a traditional solution” .
“My concern would be that maybe they left it a little late, that they don’t have the technology and the current setup. [or] the right product to compete in their key markets,” Wells said.
“For Nissan in particular, they’re out of the US market. That’s their biggest concern, and they can’t fix it that quickly,” he added.
Employees work on the assembly line of new energy vehicles at a factory of Chinese EV startup Leapmotor on April 1, 2024 in Jinhua, Zhejiang Province, China.
Vcg | China Visual Group | Getty Images
JPMorgan’s Akira Kishimoto shared similar views on some of the barriers to a future Nissan-Honda merger, saying “the hurdles to overcome will be high.”
“At the very least, we think Nissan needs to clarify where its particularly complex capital relationship with Renault, which involves the French government, ends and also provide details on the restructuring proposal it has announced,” Kishimoto said in a statement. research note published Wednesday.
“We think that Honda needs to show how it will handle the major [battery electric vehicles] and battery investments in Canada,” Kishimoto said.
JPMorgan said it will now have to wait for any concrete announcement from each company.
“Full-scale transformation of the automotive industry”
“This link is not completely unexpected because obviously they announced their partnership earlier this year,” Lucinda Guthrie, executive editor of Mergermarket, told CNBC’s “Street Signs Europe” on Wednesday.
“Some of the reports I have seen claims that this has come about because of Foxconn make an approach to Nissan. Now, with this particular transaction, I wonder if it will be a hardcore merger or if it will be more of a collaboration,” he added.
Apple Supplier Foxconn has approached Nissan about taking a stake, Bloomberg reported on Wednesday, citing an unnamed source. The Taiwanese company has invested heavily in EVs in recent years. CNBC has contacted Foxconn for comment.
Echoing the latest development, Honda has recently tested the water on a collaboration with General Motorsat first finally decides to move away.
Speculation about the consolidation between Honda and Nissan could follow a similar trajectory, Guthrie said.
“You have to keep in mind that this would have to come with the blessing of the Japanese government because there is the potential for workforce cuts, but then, how do Japanese automakers compete with low-cost vehicles from China? ” Guthrie said.
Nissan sign at a dealership in Richmond, California, United States, on Friday, June 21, 2024.
Bloomberg | Bloomberg | Getty Images
Citi’s Arifumi Yoshida said a merger could 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.
However, Yoshida said the decision could be seen as a move “in anticipation of the large-scale transformation of the auto industry.”
— CNBC’s Michael Wayland contributed to this report.
