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Vehicles are offered for sale at a Nissan dealership on December 18, 2024 in Libertyville, Illinois.
On December 18, 2024, Japanese automotive giants Nissan and Honda officially announced they are engaged in discussions to merge, a move that could establish the third-largest automaker globally based on sales.
During a press conference, Honda’s CEO, Toshihiro Mibe, emphasized the necessity for larger operational scale to effectively compete in advancements surrounding electric vehicles (EVs) and autonomous driving. He indicated that a merger would provide both companies with capabilities and advantages that would be unattainable under the current collaborative framework.
The envisioned merger is designed to enhance resource sharing, intelligence collaboration, and achieve economies of scale while preserving the individuality of both marques. Mibe revealed plans to establish a holding company as the new parent for Nissan and Honda, which would be publicly traded on the Tokyo Stock Exchange. The integration would result in the larger Honda nominating the majority of the board members for the combined entity. This new automotive group could potentially generate revenues upwards of 30 trillion yen (approximately $191.4 billion) along with an operating profit exceeding 3 trillion yen.
Honda reported a full-year operating profit of 1.382 trillion yen for the period ending March 2024, in contrast to Nissan’s profit of 568.7 billion yen. Should the merger proceed, the two companies would possess a combined market capitalization approaching $54 billion, with Honda’s valuation accounting for a substantial portion at $43 billion.
Negotiations regarding the merger are projected to conclude by June 2025. Mibe clarified that upon approval, the integration process would be a mid to long-term initiative, with substantial advancements expected post-2030.
Nissan’s strategic partner, Mitsubishi Motors, has also been invited to consider joining the newly formed entity, with a decision anticipated by the end of January 2025.
The merger discussions arise in the context of intense competition in the EV segment from companies like Tesla and China’s BYD, highlighting a trend of consolidation among legacy automakers due to the significant costs associated with transitioning to electric technologies.
Challenges for Nissan
The possibility of a merger was first reported by Japan’s Nikkei newspaper on December 17. Following the news, Nissan’s stock experienced a notable increase. Analysts suggest that the discussions stem from Nissan’s recent financial struggles and the ongoing restructuring of its long-term partnership with French automaker Renault.
Nissan has announced plans to reduce its workforce by 9,000 positions and cut its global production capacity by 20% as part of its recent quarterly report. Mibe acknowledged that some Honda shareholders might regard the merger as an endorsement of Nissan; however, he insisted that the partnership hinges on Nissan’s ability to execute its turnaround strategy successfully.
“If both Nissan and Honda cannot stabilize independently, the merger discussions will ultimately falter,” Mibe affirmed. Complementing this, Nissan’s CEO, Makoto Uchida, remarked that the merger talks are fundamentally about enhancing the company’s competitiveness without abandoning their turnaround objectives.
Industry experts cite numerous challenges confronting Nissan, including inadequate product offerings and declining market performance. Peter Wells, a professor at Cardiff Business School, noted, “Nissan has encountered persistent difficulties within its domestic market and possesses a questionable product lineup.” He stressed the importance of significant changes given the numerous indicators signaling trouble for the company.
Renault’s shares saw a decline of 1.2% in European trading sessions, revealing the complexities of the existing alliance, where Renault holds a 17% stake in Nissan and extends its ownership by an additional 18.7% through a French trust. Simultaneously, Nissan continues to play a strategic role in Renault’s EV and software subsidiary, Ampere.
In Asian markets, Nissan shares closed 1.2% higher shortly before the announcement, while Honda shares rose by 3.8% and Mitsubishi’s shares increased by 0.6%.
What the potential merger between Nissan and Honda unfolds for the automotive landscape remains to be seen.
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