Last week, Japanese business newspaper Nikkei reported that the Japanese automobile giants Nissan and Honda were discussing a possible merger. The companies involved have since confirmed the truth—that the Honda and Nissan merger is really happening.
The Honda and Nissan merger would become the third-largest car manufacturer in the world, behind only Toyota and Volkswagen. This joint entity would have a combined value of approximately $54 billion—of which Honda contributes $43 billion.
How the Nissan and Honda Merger Benefits Both Companies
| Car Manufacturer | Market Value | Cars Sold in 2023 |
|---|---|---|
| Honda | 6.74 trillion yen | 3.8 million cars in 2023 |
| Nissan | 1.67 trillion yen | 3 million cars |
| Mitsubishi | 717 billion yen | 700,000 cars in 2023 |
The Honda and Nissan merger, with Mitsubishi potentially joining in, would create the third-largest automobile seller in the world and sell roughly 8 million cars per year. Nissan and Honda are the second and third largest car manufacturers in Japan and sold a combined total of approximately 7.5 million cars last year. According to Toshihiro Mibe, CEO of Honda, the joint company could generate 30 trillion yen ($191.4 billion) in revenue and over 3 trillion yen in operating profit.
While the world’s largest car manufacturer, Toyota, adopted hybrid technology relatively early, Nissan and Honda haven’t kept up with the switch to clean energy and EVs. As a result, these Japanese companies have been struggling to compete with EV makers like BYD and Tesla. Here are some ways the Honda Nissan merger will prove beneficial to both businesses:
Standardized Vehicle Platforms
As part of the Honda-Nissan alliance, sharing vehicle platforms and powertrains would reduce the cost of production and simplify the manufacturing process of both carmakers. Thus, sharing platforms and parts would increase revenue and help both brands streamline their product portfolio.
Research and Development
Both companies would also potentially increase their shared R&D. By integrating technology such as EV powertrains and sharing research on autonomous driving and software-driven cars, the Nissan and Honda merger will see the integration of their back-office operations and ultimately their supply chain.
Scaling the Competition
In the rapidly changing automobile world, smaller car manufacturers often struggle to keep up. Both Honda and Nissan have been struggling with low sales and profit margins due to the increasing competition from EV makers. Merging the revenue of these two companies could potentially help them rival the massively dominant Toyota MotorCorp and be able to face international competitors more easily as well.
Why Nissan Needs This Merger
Nissan has been struggling both globally and in Japan. This November, it reported a quarterly loss of 9.3 billion yen or $61 million. Drastic measures followed: the carmaker announced that it was laying off roughly 6% of its global workforce and reducing its global production capacity by as much as 20%. CEO Makoto Uchida reportedly took a 50% pay cut as well.
If the significant losses weren’t enough, the company’s internal affairs were a wreck. Nissan’s former CEO, Carlos Ghosn, was arrested in 2018 under charges of concealing income. Ghosn later received bail and, when on house arrest, was smuggled out of the country inside a musical instrument box. He currently resides in Lebanon. Ghosn called the Honda and Nissan merger “a desperate move,” stating to Bloomberg, “It’s not a pragmatic deal because frankly, the synergies between the two companies are difficult to find.”
Nissan has also been working in collaboration with French carmaker Renault for a long time. The Nissan and Honda merger may inevitably put the Nissan-Renault alliance in jeopardy.
Legal Details Of The Merger
The details of the Honda Nissan merger were revealed in a joint press conference in Tokyo. The two companies have signed a Memorandum of Understanding (MoU) that signals the beginning of more merger talks.
Honda and Nissan will operate as independent companies but will streamline their operations under a joint holding company that will be listed on the Tokyo Stock Exchange. To create this holding company and finalize the deal, the two need approval from all company shareholders. Honda, being larger and more successful, will nominate the board members for the joint company.
Discussions around the Honda and Nissan merger will conclude around June 2025.
Mitsubishi Motors’ Involvement in the Honda and Nissan Merger
Nissan is a top shareholder in Mitsubishi Motors, with a 24% stake in the Japanese company. As Nissan’s strategic partner, Mitsubishi has been offered the option of joining the Honda and Nissan merger as well. Mitsubishi Motors has already signed an MoU, stating that it will reveal its decision regarding the merger by the end of January 2025.
Conclusion
The world’s largest car manufacturer, Toyota Motor Corp., shares a partnership with three Japanese carmakers: Suzuki, Mazda, and Subaru. The Honda and Nissan merger represents the growing trend towards consolidation. Honda CEO Toshihiro Mibe has stated that the companies have decided they can better navigate the changing industry together.
Will the Honda and Nissan merger mark global success for the two companies? Or is Carlos Ghosn right, and will this “desperate move” spell ruin for these Japanese auto giants? It’s too soon to tell.
