Nissan Motor CEO Makoto Uchida (left) listens as Honda Motor CEO Toshihiro Mibe (right) attends a joint press conference on March 15, 2024 in Tokyo, Japan.
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The best Japanese car manufacturers Nissan engine AND Honda engines it is understood that they explore a hit fusionsending shockwaves through the global automotive industry as two rival companies try to stay competitive in the market the road to full electrification.
Nissan and Honda plan to enter merger negotiations, Japanese business newspaper Nikkei announced overnight, citing sources close to the matter and noting that the domestic partners expect to sign a memorandum of understanding soon. According to reports, both companies will also want to include Mitsubishi Motors, in which Nissan is the main shareholder with a 24% stake, in the transaction.
According to Citi, the potential merger could create the world's third-largest auto group in terms of vehicle sales, with 8 million sales a year. That would put Nissan-Honda-Mitsubishi behind another Japanese automaker Toyota engine and Germany affected by the crisis Volkswagenappropriately.
In similar statements, Nissan and Honda neither confirmed nor denied the Nikkei reports. Newspaper later reported that talks could start as early as next week.
The merger report comes as many automotive giants struggle to cope with increased global competition from larger electric vehicle makers such as Tesla and Chinese BYD.
Previously Nissan and Honda bogus in March established a strategic partnership to cooperate in the production of key components of electric vehicles.
However, the megamerger is expected to face several hurdles. Analysts have raised concerns about the likelihood of political control in Japan, given the possibility of layoffs if the deal pushes through and the end of Nissan's alliance with the French vehicle maker Renault is considered crucial to the entire process.
Peter Wells, professor of business and sustainability at the Center for Automotive Research at Cardiff Business School, described the reported merger as a “really important” step – one that could help Nissan and Honda combine their assets, save money on costs and create technologies that will use the need for the future.
“There has been a lot of speculation about Nissan's position over the last 12 months. The company tried to equalize or balance its relationship with Renault, but it had difficulty,” Wells told CNBC “Road signs in Europe“on Wednesday.
“It has problems on the market, it has problems at home, it does not have the right product offer. There are so many warning signs right now, so many red flags around Nissan, something must have happened,” he said. in addition. “Whether that is the answer is another question.”
Nissan shares rose nearly 24% on Wednesday, outperforming the company's stock best trading day in at least 40 yearsaccording to data firm FactSet. The share price of the Tokyo-listed company remains almost 25% lower since the beginning of the year.
Meanwhile, Honda shares fell more than 3% in New York.
Barriers to a possible merger
Asked whether consolidating Nissan and Honda could be a good way to combat competition from Chinese electric car makers, Cardiff Business School's Wells said the deal could be characterized as a “traditional solution.”
“My concern is that they may have gotten into this a little too late because they don't have the current technology and setup (or) the right product to compete in their key markets,” Wells said.
“Especially with Nissan, they can't keep up with the US market. This is their main problem and they cannot fix it quickly,” he added.
Employees work on the assembly line of new energy vehicles at the factory of Chinese electric vehicle startup Leapmotor, April 1, 2024, in Jinhua, Zhejiang province, China.
Vcg | Visual China Group | Getty Images
JPMorgan's Akira Kishimoto shared similar views on some of the barriers to a potential Nissan-Honda merger, stating that “the hurdles to overcome will be high.”
“We believe Nissan must at least clarify where its particularly complex capital ties with Renault, which involve the French government, will end, as well as provide details on the announced restructuring proposal,” Kishimoto said in a research note published Wednesday.
“We think Honda needs to show how it can handle large investments (battery electric vehicles) and battery investments in Canada,” Kishimoto said.
JPMorgan said it must now wait for specific announcements from either company.
“Full-scale transformation of the automotive industry”
“This combination is not completely unexpected, as they obviously announced the partnership earlier this year,” Lucinda Guthrie, editor-in-chief of Mergermarket, told CNBC's “Street Signs Europe” on Wednesday.
“Some of reports I've seen claims that this happened as a result Foxconn approaching the Nissan. Now, in the case of this particular transaction, I have doubts whether it will be a hardcore merger or a partnership,” she added.
Apple supplier Foxconn approached Nissan with a proposal to take over shares, Bloomberg reported on Wednesday, citing an anonymous source. The Taiwanese company has been investing heavily in electric vehicles in recent years. CNBC has reached out to Foxconn for comment.
Echoing recent developments, Honda recently tested the waters in a partnership with the company General Motorsbefore he finally decided to leave.
Guthrie said speculation about Honda and Nissan consolidating could follow a similar pattern.
“It's important to remember that this would have to be done with the approval of the Japanese government as there is the potential for job cuts, but how will Japanese automakers compete with low-cost vehicles from China?” Guthrie said.
Nissan signage at a dealership in Richmond, California, U.S., Friday, June 21, 2024.
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Citi's Arifumi Yoshida said the merger would likely have a negative impact on Honda but a positive impact on Nissan and Mitsubishi.
“Given Honda's competitiveness in the motorcycle and (hybrid-electric vehicle) markets and the strength of its brand, we believe it has the ability to outperform rivals over the next 5 to 10 years,” Yoshida said in a research note published Wednesday.
Nevertheless, Yoshida said the decision could be seen as made “in anticipation of a full-scale transformation of the auto industry.”
– CNBC's Michael Wayland contributed to this report.