Taking A Second Look At The Honda/Nissan Merger

By Imran Last updated Jan 2, 2025

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Often, when two corporations merge, there are a number of press releases replete with the phrases “synergy” and “economies of scale” thrown about like confetti at a marriage. When Toshihiro Mibe, the CEO of Honda, was requested just lately what the strategic advantages of the brand new partnership had been, Mibe-san replied, “That’s a tough one.” He isn’t alone find it arduous to clarify. In line with Autoblog, the merger has been met with skepticism from analysts and confusion amongst business insiders. Whereas it might create a worldwide automotive big producing 7.4 million autos yearly, critics are questioning whether or not this union is a savvy strategic transfer or a determined gamble.

For one factor, it doesn’t appear to be a merger of equals. Honda enjoys regular gross sales due to its robust hybrid lineup and constant buyer base. Nevertheless, it has not been capable of make a big affect within the EV market, though it has a gross sales winner on its fingers with the battery electrical Prologue, which is predicated on the Basic Motors Ultium platform. So are the Blazer EV and Equinox EV, however the Prologue is outselling each of them.

As we speculated just lately, the Prologue is a Honda first and an electrical automotive second. Individuals who have owned Hondas beforehand get in and instantly really feel comfy behind-the-wheel. Those that first expertise a Tesla with its “pc on wheels ” look want time to get acclimated to a complete new behind the wheel expertise.

However Honda has parted firm with Basic Motors. Though the Prologue continues to be being assembled on the GM manufacturing facility in Spring Hill, Tennessee — and one Acura mannequin as properly — there will likely be no different Honda electrical automobiles constructed there. Some business observers consider that Nissan’s expertise with constructing electrical automobiles could assist Honda find out how to take action as properly.

How Does Nissan Assist Honda?

Nissan is having important issues of its personal. Gross sales are down considerably worldwide and significantly within the US. Autoblog says the Nissan supplier community is faltering and its EV lineup is stagnant. The LEAF was as soon as a groundbreaking electrical automotive that was a gateway to the EV revolution for a lot of, however it now feels dated in comparison with different EVs in the marketplace, particularly these from Hyundai and Kia, whereas the Ariya battery electrical SUV is languishing on supplier heaps.

Analysts assume the merger is extra about politics than economics. They speculate that Honda could also be stepping in as Nissan’s white knight to forestall a possible hostile takeover by Taiwan’s Foxconn, which is known for manufacturing the Apple iPhone. It has reportedly put its plans to bid for Nissan on maintain till the merger talks between Honda and Nissan are concluded. Whereas Foxconn hasn’t fully dominated out a future bid, the corporate appears content material to let the 2 Japanese automakers decide their path ahead earlier than making its subsequent transfer.

Foxconn positively is all in favour of stepping into the auto manufacturing enterprise. It now owns the previous Lordstown Motors manufacturing facility and has made noises about manufacturing autos for Fisker, Scout Motors, Tesla, and Saudi Arabia. Having it purchase Nissan can be a significant blow to Japanese delight, however it might occur if the Honda/Nissan talks fail.

The Politics Of The Deal

Regardless of Honda’s insistence that the merger is “not a rescue,” many see it as an try to forestall additional destabilization of Nissan and shield Japan’s automotive business from overseas management. Which may be why Mitsubishi is being included within the deal as properly. There’s rampant hypothesis that Japan’s Ministry of Financial system, Commerce, and Business (METI) performed a big function in encouraging the merger. By endorsing the partnership, METI could possibly be in search of to make sure that Nissan stays below Japanese management, thwarting Foxconn’s curiosity in buying the struggling automaker.

What METI needs, METI will get. Most suspect the fascination within the Japanese automotive business for hydrogen gasoline cell powered automobiles just like the Toyota Mirai and Honda Readability was prompted by the federal government for political causes, not any burning need to carry hydrogen powered transportation to the world.

In concept, the Honda/Nissan merger might have some benefits. Honda’s experience in hybrid expertise might assist modernize Nissan’s getting older lineup, whereas Nissan’s established EV infrastructure may give Honda the increase it must compete within the rising electrical market. Moreover, Nissan’s intensive manufacturing community and presence in Southeast Asia might complement Honda’s world operations. Nevertheless, the overlap between the 2 corporations is substantial and it’s unclear whether or not their mixed efforts will create a stronger entity.

The Advantages Might Be Years Away

If the merger proceeds, it gained’t be a fast repair. Analysts at AlixPartners estimate it might take three to 5 years for the businesses to see any significant outcomes. Within the meantime, rivals like Toyota, Volkswagen, and rising Chinese language automakers are prone to widen the aggressive hole. Carlos Ghosn, the previous CEO of Nissan, has been vocal in his criticism of the merger. “Which means you’re placing management above efficiency,” mentioned Ghosn. “Personally, I don’t assume it’s going to achieve success.”

Since information of the potential merger surfaced, the share costs of Nissan’s and Honda’s shares have fluctuated considerably. After hovering greater than 60% on information of the deal, Nissan’s inventory has tumbled in latest days, pushed by concern that traders would maintain a decrease stake within the proposed joint holding firm. Honda, in the meantime, noticed its inventory worth bounce about 17% in latest days after the automaker introduced plans to purchase again roughly $7 billion value of shares by subsequent December. Honda’s announcement helped alleviate earlier issues from traders who anxious that the merger with Nissan would negatively affect the corporate’s worth.

All this merger discuss raises extra questions than it solutions. Why would Honda align itself with an organization on the point of monetary wreck? Is that this a calculated transfer to guard home pursuits, or a determined gamble to remain related in an more and more aggressive market? Many CleanTechnica readers have urged over time that the EV revolution would result in realignments within the auto business. If even the CEO of Honda can’t determine the explanation why merging with Nissan is an efficient enterprise resolution, it’s little surprise that others are questioning too.