Honda Nissan Merger Update – Things Get Complicated

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For years, we’ve got been predicting consolidation would happen within the auto business as new firms targeted on producing electrical vehicles got here alongside and put stress on present firms. These newcomers have a tricky row to hoe to scale up their operations to the purpose the place economies of scale make it attainable to show a revenue, however legacy automakers face hurdles of their very own as a result of they should promote standard vehicles to be able to pay for the transition to electrical automobiles. It’s onerous to trip two horses on the similar time. When Honda and Nissan announced a month in the past that they meant to merge the 2 firms, we weren’t all that stunned.

Now that there was a while to digest the merger concept, it seems there are just a few hurdles that have to be cleared by Honda and Nissan in the event that they count on to make it to the altar. The most important is that Honda needs Nissan to resolve its relationship with Renault earlier than the deal can transfer ahead. Nissan and Renault have an alliance courting again to 1999 that Mitsubishi joined in 2016. Citing a report by Kyodo Information, Bloomberg says Honda has requested Nissan whether or not it will have the ability to purchase out Renault’s 35.7% share within the firm leftover from when the 2 have been carefully aligned below the management of Carlos Ghosn. At right this moment’s costs, the worth of the Renault shares is round  ¥557 billion yen ($3.6 billion).

Concern Of International Influences

Honda reportedly is anxious that Nissan might fall below an undesirable overseas affect ought to Renault’s stake be acquired by a 3rd occasion whereas negotiations to soak up Nissan are underway. Final yr, there have been rumors circulated that Hon Hai Precision Trade Co., the iPhone maker generally known as Foxconn, was thinking about a partial or full takeover of Nissan to make the most of its manufacturing capability and create a pathway for it to change into an EV producer in its personal proper. Seeing Nissan fall into the arms of a Taiwanese firm can be unacceptable to the Japanese authorities. Honda and Nissan have mentioned they plan to announce a framework for his or her deal by the top of this month and intend to create a separate holding firm that will function a company dwelling for each  companies by August 2026.

Whether or not Nissan would have the funds to purchase out Renault’s stake is questionable, Bloomberg says. Its market worth has slumped to about ¥1.56 trillion, whereas its money and money equivalents have been round ¥1.52 trillion as of the top of 2024. Nissan is struggling financially, which is one purpose why a merger with Honda is interesting. In November, Nissan mentioned it will dismiss 9,000 employees and reduce a fifth of its manufacturing capability after internet revenue plummeted 94% within the first half of its fiscal yr. Nissan now sees its working revenue plunging to only ¥150 billion within the yr ending in March, down 70% from its earlier forecast. Administration additionally lowered their income outlook by greater than 9%, which means they now count on nearly no development for the yr.

In mild of the monetary baggage that Nissan brings to the desk, some have questioned what precisely it’s that Honda is getting out of the deal. When Toshihiro Mibe, the CEO of Honda, was asked recently what the strategic advantages of the brand new partnership have been, Mibe-san replied, “That’s a difficult one.” And what of Renault? It was not talked about when the 2 firms introduced they meant to merge. Afterward, in a quick comply with up, Renault merely mentioned the corporate would “consider all options based on the best interest of the Group and its stakeholders.” That could be a fairly cryptic response from an organization that has a large monetary stake within the final result.

Tangled Webs Between Honda & Nissan In China

The second hurdle to the Honda-Nissan merger is that each firms have partnered with Chinese language producer Dongfeng Motor, which was Nissan’s unique accomplice when it first needed to enter the Chinese language market. Dongfeng not solely builds some Nissan fashions below contract, it’s also concerned within the growth of vehicles, particularly EVs. Honda additionally has a three way partnership in China with Dongfeng, which entails EV growth and manufacturing. Most not too long ago, it began producing the Honda Ye sequence of vehicles, that are bought solely in China.

Writing for Inside EVsKevin Williams mentioned that Honda has been adamant that it needs to harmonize growth prices between each lineups., But they’ve a whole model in China they’ve spent a variety of money and time to develop, manufacture, and market that competes with different vehicles developed collectively by Dongeng and Nissan. At a Honda spherical desk dialogue at CES 2025, Williams requested what would change into of the tables of relationships between Honda, Nissan, and Dongfeng.

“Dongfeng Nissan and Dongfeng Honda are two different companies. Of course, we know the situation…but actually, the discussions are between (only) Honda and Nissan. Sooner or later, we will have to talk about it, but so there’s no conclusion over that,” mentioned Katsushi Inoue, Honda’s World Head of Electrification Enterprise Improvement. He added that Honda might make a shared announcement about the way forward for the connection with Dongfeng quickly, however had nothing so as to add in the intervening time.

From so many views, this mash-up between Nissan and Honda feels so messy, Williams mentioned. Honda has mentioned it needs to simplify growth and probably share EV prices with Nissan, however how that can work is unclear. Honda already has three joint ventures or shared electrical automotive growth preparations with Dongfeng, Sonyand Basic Motors which might be all unrelated to one another. Dongfeng itself has a line of vehicles for budget-minded drivers known as Venucia, which makes use of elements from the Nissan-Renault-Mitsubishi elements bin. For the time being, nobody is aware of how it will all play out. The truth is, even the senior executives at Honda might not know the reply. Maybe Toshihiro Mibe is extra right than we notice when he says, “That’s a difficult one.”

From the attitude of these on the surface wanting in, this seems loads like chaos. Honda is a proud firm with a protracted historical past of constructing top quality vehicles. It will be a disgrace to see it succumb to the turbulence of the EV transition. Possibly a yr from now we are going to know whether or not it has efficiently navigated right this moment’s treacherous crosscurrents roiling the auto business.