Honda and Nissan, two of Japan’s prominent automotive manufacturers, are reportedly indulging in exploratory discussions regarding a possible merger aimed at bolstering their competitive stance against electric vehicle (EV) manufacturers, especially those emerging in China. This move comes amid a significant industry shift, as traditional petrol and diesel vehicles are on the decline while demand for electric vehicles surges. Notably, China has become a dominant force in the global EV market, contributing almost 70% of global EV sales in November 2023.
In March of this year, Honda and Nissan took a preliminary step by agreeing to explore a strategic partnership specifically targeting the electric vehicle sector. This inquiry had the aim of leveraging the inherent strengths of both companies to foster mutual growth in a rapidly changing automotive landscape. In a bid to maintain transparency, both firms provided identical responses to inquiries from the media, stating, “As announced in March of this year, Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other’s strengths.”
The backdrop of these discussions is a highly competitive market where numerous car brands are striving to catch up as the industry transforms dramatically. Notably, Honda and Nissan reported a combined total of 7.4 million vehicle sales globally in 2023, yet their market share in China shows a concerning decline. This is particularly notable as they face fierce competition from cost-effective electric vehicle manufacturers such as BYD, which has recently experienced a substantial increase in quarterly revenues, surpassing even Tesla for the first time in October.
Although Honda and Nissan have neither confirmed nor denied the legitimacy of the merger talks, they underlined that it is not an announcement made by either company. They assured their stakeholders by stating, “If there are any updates, we will inform our stakeholders at the appropriate time.” However, should a merger between these competitors—who rank as the second and third largest car manufacturers in Japan—materialize, it is anticipated there would be considerable complexities involved.
Political ramifications are likely to arise in Japan, where such a merger could prompt scrutiny due to potential job cuts. Furthermore, Nissan would need to navigate the delicate process of disentangling its longstanding alliance with French automaker Renault, which adds another layer of complication to the prospective merger talks.
Despite the hurdles, Honda and Nissan have previously moved beyond the discussions about a merger. They agreed in March to collaborate more closely on electric vehicle developments, and by August, they had decided to deepen their partnership, focusing on battery technology, among other technological advancements. Furthermore, both companies are looking to involve Mitsubishi in discussions regarding intelligence and electrification.
Industry analysts, such as Jessica Caldwell from Edmunds, have expressed concerns regarding the sustainability of smaller automotive players amidst fierce competition from many newly established manufacturers, particularly in China. Caldwell emphasized that survival in this landscape is becoming increasingly challenging, underscoring the need for companies like Honda and Nissan to explore strategic mergers not only for survival but also to be able to invest adequately in future innovations.
In summary, as the landscape of the automotive industry continues to evolve, especially with the seismic shift towards electric vehicles, strategic partnerships and mergers may become pivotal for established brands like Honda and Nissan in maintaining their market presence and adapting to the challenges posed by both domestic and international competitors. The overarching narrative is a cautionary tale of adaptability and the relentless push for innovation amidst an ever-changing global marketplace.
