Honda and Nissan to Begin Merger Talks Amid Rising EV Competition
Dec 17 (Reuters) - Japanese automakers Honda Motor (7267.T) and Nissan Motor (7201.T) are set to initiate merger discussions as they face mounting pressure from global electric vehicle (EV) manufacturers, the Nikkei reported on Tuesday.
The two companies have been strengthening ties in recent months, responding to growing competition from Chinese EV makers that has placed significant strain on traditional automakers struggling to turn a profit in the EV sector.
In identical statements, Honda and Nissan denied that the merger talks were announced by either company. "As announced in March, Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other's strengths," the companies stated, promising to update stakeholders when appropriate.
Honda's U.S.-listed shares rose 1.3% following the news.
Challenges in the Chinese Market
Nissan and Honda, Japan's second- and third-largest automakers respectively, have seen their market share decline in China. In November, China accounted for nearly 70% of global EV sales, with over 1.27 million units sold that month.
Combined, the two automakers sold 7.4 million vehicles globally in 2023 but face stiff competition from companies like BYD (002594.SZ) and other Chinese EV leaders, which have rapidly gained market dominance.
Global Context of EV Industry Pressure
The global auto industry is grappling with challenges. U.S. automakers General Motors (GM.N) and Ford Motor (F.N) have slowed EV investments due to high borrowing costs and insufficient charging infrastructure. Meanwhile, Volkswagen (VOWG_p.DE) is locked in contentious cost-cutting discussions with unions as demand softens in Europe.
The sector is also uncertain about the future of U.S. EV policies under the incoming administration of President Donald Trump, which may roll back EV-friendly measures.
Proposed Merger Details
In March, Honda and Nissan agreed to collaborate on EVs and later expanded their partnership in August to include joint efforts on batteries, e-axles, and related technologies. According to the Nikkei, the companies are exploring operating under a single holding company and are expected to sign a memorandum of understanding soon.
The potential merger could also involve Mitsubishi Motors (7211.T), of which Nissan owns a 24% stake. Bringing Mitsubishi into the fold would create one of the world’s largest automotive groups. Specific details, including the companies' stakes in the new entity, are yet to be determined.
If finalized, this deal could be the industry’s largest since the $52 billion merger of Fiat Chrysler and PSA in 2021, which formed Stellantis.
Nissan’s Struggles
Nissan has faced declining demand in China and the U.S., prompting cost-saving measures and organizational restructuring. Last month, the company reported a 90% drop in half-year net earnings and slashed its annual profit forecast by 70%. Once an EV pioneer with the Nissan Leaf, the company has been eclipsed by newer and more specialized EV competitors.
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