Honda eyeing struggling rival Nissan

(Keystone-ATS) Already associated in a “strategic partnership”, Honda and Nissant will begin talks to come together under the leadership of a single holding company and will “soon” sign a memorandum of understanding, the daily Nikkei said on Wednesday. Honda is considering several options: merger, capital merger or holding company, its vice-president Shinji Aoyama told the Bloomberg agency. According to Japanese television TBS, the official announcement could come as early as Monday.

“As announced in March and August, we are discussing possibilities for cooperation in many areas” and a merger “is among the possibilities,” admitted a Honda spokesperson to AFP. The two groups “are exploring various possibilities for collaboration, to leverage their respective strengths,” Nissan simply responded.

For its part, Taiwanese electronics giant Foxconn (Hon Hai), a key supplier to Apple, has also approached Nissan to acquire a majority stake, with the aim of expanding its activities to electric cars, according to Bloomberg. Honda and Nissan are respectively the second and third Japanese manufacturers behind Toyota.

“Strategic partnership”

They plan to include Mitsubishi Motors, of which Nissan is the main shareholder, within the holding company, to give birth to one of the largest automobile groups in the world behind Toyota and the German Volkswagen, specifies Nikkei. Between them, they combined 4 million vehicles sold in the first half, compared to 5.16 million for Toyota.

Nissan shares soared by 23.69% on Wednesday on the Tokyo Stock Exchange, that of Mitsubishi by 19.64%, while Honda shares fell by 3.03%.

Honda and Nissan had already announced in March a memorandum of understanding for a “strategic partnership”, wishing to collaborate in software platforms and components for electrified vehicles. Initiative that Mitsubushi joined in August, at a time when Japanese manufacturers are all seeking to quickly strengthen their position in the electric sector, the takeoff of which in China and Europe has overtaken them.

Merging would be “a strategic necessity (…) the escalating costs of developing electric vehicles and batteries make cooperation necessary to manage risks, reduce the financial burden” and “secure supply chains”, against a backdrop of profitability narrow, tells AFP Tatsuo Yoshida, analyst at Bloomberg Intelligence.

For Nissan, he adds, “a merger would provide short-term respite” from strong financial pressure: the group announced in early November that it would cut 9,000 positions from its global workforce and cut its production capacities. faced with the plunge in its sales, particularly in China in the face of competition from local electric brands.

For its part, due to a lack of critical mass, Honda is struggling to develop technologies for electrification and has just failed in its negotiations with General Motors for the joint development of an electric vehicle. “Honda would benefit from economies of scale in terms of cost reduction and expansion of ranges”, while it does not market any electric models, underlines Seiji Sugiura, of Tokai Tokyo Intelligence.

Catch-up

Japanese groups have long chosen to focus instead on hybrid vehicles combining thermal and electric engines, which have proven very popular in Japan, representing 40% of sales in 2022 in the archipelago. Only 1.7% of cars sold in Japan that year were electric, compared to 15% in Western Europe and 5.3% in the United States.

This has led Japanese manufacturers to neglect the growth in global demand for all-electric vehicles, which has allowed China to overtake Japan as the world’s leading vehicle exporter in 2023, even though Nissan is among the very first. manufacturers to have marketed a car powered by an electric motor.

In Japan itself, the market is now shaken by the American Tesla, the arrival of the Chinese electric champion BYD and the return of the South Korean Hyundai, again with electrified vehicles.

Under pressure, Honda announced in May that it wanted to double its investments in this area to reach 65 billion dollars by 2030, with the objective of selling 100% of electric vehicles by 2040. Nissan assured that 16 of its 30 new models over the next three years are “electrified”.

A merger would give them the means to achieve their ambitions and would further turn the page on Nissan’s historic alliance with the French Renault, already significantly reduced last year. Nissan had opposed a merger with Renault, but a merger with Honda “could be considered more balanced and equitable”, says Tatsuo Yoshida. And, he adds, “given its degraded financial situation, Nissan may not have much choice.”