Japanese automakers Honda and Nissan will attempt to merge and create the world’s third-largest automaker by sales as the industry undergoes a dramatic shift in its transition away from fossil fuels.
The two companies said they signed a memorandum of understanding on Monday and Mitsubishi Motors, a smaller member of the Nissan alliance, also agreed to join talks on integrating their businesses.
Honda will initially lead the new management while maintaining the principles and brands of each company.
The following is a quick look at what Honda and Nissan combined would mean for the companies and the auto industry.
Industry Turmoil The rise of Chinese automakers is roiling the industry at a time when manufacturers are struggling to shift from fossil fuel-powered vehicles to electric vehicles.
Relatively inexpensive EVs from China’s BYD, Great Wall and Nio are eating away at American and Japanese car companies’ market share in China and elsewhere. Japanese automakers have lagged behind bigger rivals in EVs and are now trying to cut costs and make up for lost time.
Nissan, Honda and Mitsubishi announced in August that they would share components such as batteries for electric vehicles and jointly work on software for autonomous driving to better adapt to dramatic changes in the auto industry centered around electrification. Will do research.
A preliminary agreement between Honda, Japan’s second-largest automaker, and Nissan, Japan’s third-largest, was announced in March. The merger could result in huge profits of around $55 billion, based on the market capitalization of the three automakers. Joining forces would help smaller Japanese automakers compete with market leaders Toyota Motor Corp of Japan and Volkswagen AG of Germany. Toyota itself has technology partnerships with Japan’s Mazda Motor Corp and Subaru Corp.
What does Honda want from Nissan? Nissan has truck-based body-on-frame large SUVs like the Armada and Infiniti QX80 that Honda doesn’t, with big towing capacity and good off-road performance, said vice president Sam Fiorani. Of AutoForecast Solutions.
He said Nissan has years of experience making battery and electric vehicles and gas-electric hybrid powertrains that could help Honda develop its EVs and next-generation hybrids. “Nissan has some product segments where Honda doesn’t currently play,” said Detroit-area automotive industry analyst Sam Abuelsamid, who said a merger or partnership could help.
While Nissan’s electric Leaf and Ariya haven’t sold well in the U.S., they are solid vehicles, Fiorani said. “They are not resting on their laurels and they are developing this technology,” he said. “They have new products coming out that can provide Honda with a good platform for its next generation.”
why now? Nissan said last month it was cutting 9,000 jobs, or 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 it reshuffled its management and its chief executive, Makoto Uchida, took a 50% pay cut to take responsibility for the financial crisis, saying Nissan needed to become more efficient and increase market choice. There is a need to better respond to cost and other global changes.
Fitch Ratings recently downgraded Nissan’s credit outlook to “negative”, citing a decline in profitability due to price cuts in the North American market. But it noted that it has a strong financial structure and solid cash reserves amounting to 1.44 trillion yen ($9.4 billion). Nissan’s stock price has fallen to the point where it is considered a bargain.
A report from Japanese financial magazine Diamond said that Taiwanese maker of iPhones Hon Hai Precision Industry Co., better known as Foxconn, has started exploring a possible acquisition of Nissan as part of its push into the EV sector, with Later talks with Honda gained momentum. The company has struggled for years after the scandal began with the arrest of its former chairman Carlos Ghosn in late 2018 on charges of fraud and misuse of company assets, charges he denies.
He was eventually released on bail and fled to Lebanon. Honda reported that its profit in the first half of the April-March fiscal year fell nearly 20% from a year earlier as sales in China were hit. Toyota plans to make 11.5 million vehicles in 2023, while Honda will make 4 million and Nissan will make 3.4 million.
Mitsubishi Motors earned just over 1 million. Even after the merger, Toyota will remain the leading Japanese automaker. If President-elect Donald Trump follows through on threats to raise or impose tariffs on imports of foreign products, all global automakers are facing a potential blowback, even from allies like Japan and neighbors like Canada and Mexico. Too.
Nissan is one of the major car companies that has adjusted its supply chain to include vehicles assembled in Mexico. Meanwhile, analysts say an “affordability shift” is happening across the industry, led by people who feel they can no longer afford to pay nearly $50,000 for a new vehicle. In the US, which is an important market for companies like Nissan, Honda and Toyota, that is forcing automakers to consider lower prices, which will further reduce industry profits.
