Japanese auto giants initiate merger talks to challenge Chinese EV market dominance
Makoto Uchida (L), president and CEO of Japanese auto maker Nissan, shakes hands with Toshihiro Mibe (R), director, president and representative executive officer of auto maker Honda, following a press conference in Tokyo on Aug. 1, 2024. (AFP Photo)
Japanese automotive manufacturer Nissan entered preliminary merger talks to strengthen its competitive position in the electric vehicle (EV) market, particularly against the dominance of Chinese companies.
Nissan shares soared more than 20% this week following stories in the Nikkei, Financial Times, and others, while Honda dipped more than 2%. Mitsubishi Motors—of which Nissan is the top shareholder—gained 13%.
“We are discussing possibilities for cooperation between Honda and Nissan in the future, in a wide range of fields and various areas, and those possibilities include the latest reports, but there is nothing decided,” a Honda spokesman told Agence France-Presse (AFP) on Wednesday.
Nissan said, “The content of the report has not been announced by either company. As announced in March of this year, Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other’s strengths. If there are any updates, we will inform our stakeholders at the appropriate time.”
Nissan has seen a turbulent decade that included the shock 2018 arrest of former boss Carlos Ghosn, who later jumped bail and fled Japan in a music equipment box.
Last month Nissan announced 9,000 job cuts, slashed its sales forecasts and said it would reduce global production capacity by 20%. Warning of a “severe situation”, its CEO Makoto Uchida said he would forfeit half his salary.
A major alliance with French automaker Renault turned into a bumpy ride for both and the two companies are now “rebalancing” their ties.
Electric race
Honda and Nissan are considering operating under a holding company and will soon sign a memorandum of understanding, the Nikkei reported. Their respective stakes in the new entity, as well as other details, will be decided later, and they also look to eventually bring Mitsubishi Motors under the holding company, the paper said.
The Financial Times reported that the exploratory talks about a merger were at an early stage. There are, however, concerns about a possible political backlash since a merger could result in significant job cuts, the FT reported.
China overtook Japan as the world’s biggest vehicle exporter in 2023, helped by its dominance in EVs, a sector where Japanese firms have lost ground by focusing on hybrid vehicles.
Honda announced plans in May to double investment in electric vehicles to $65 billion by 2030, part of its ambitious target set three years ago of achieving 100% EV sales by 2040.
Nissan also signaled similar ambitions. It said in March that 16 of the 30 new models it plans to launch over the next three years would be “electrified”.
The world’s auto giants are increasingly prioritizing electric and hybrid vehicles, with demand growing for less polluting models as concern about climate change grows. At the same time, however, there has been a slowdown in the EV market on the back of consumer concern about high prices, reliability, range and a lack of charging points.
Hybrids that combine battery power and internal combustion engines have proved enduringly popular in Japan, accounting for 40% of sales in 2022. Just 1.7% of cars sold in Japan in 2022 were electric—compared with 15% in western Europe and 5.3% in the United States.
