On Tuesday, the Nikkei financial newspaper reported on a potential mega-merger between carmakers Nissan and Honda. Neither company denied the story. “We are discussing possibilities for cooperation between Honda and Nissan in the future, in a wide range of fields and in various areas, and those possibilities include the latest reports, but there is nothing decided,” a Honda spokesperson told AFP. Talks are still believed to be at an early stage, but, according to Japanese media, the two companies could make an announcement by December 23.
Honda and Nissan Struggling To Compete Against Chinese EVs
Should the merger go through, it would create the world’s third-biggest automaker group behind Toyota and Volkswagen, in terms of sales. Honda and Nissan are Japan’s second- and third-largest car manufacturers. Between them, they sold around 7.35 million vehicles last year — 3.98 million and 3.37 million respectively — but are both struggling to compete against cheaper electric vehicles (EV) from China, such as BYD (Build Your Dreams), which earlier this year reported record-breaking quarterly revenues, surpassing Tesla for the first time. Beyond BYD, other Chinese EV manufacturers such as Nio, Zeekr, Xiaomi and Xpeng all recently broke personal sales records.
In an attempt to catch up with Chinese competitors, Honda and Nissan put their rivalries aside to work together on EV technology, starting in March. Five months later, ties between the two companies grew stronger as they agreed to collaborate on batteries and other technology. Mitsubishi Motor Company (MMC) could also be brought into any potential partnership. In 2016, Nissan acquired a 34% equity stake in MMC, becoming its largest shareholder. Last month, it reduced its stake in the company to 24.05%.
Nissan Announces 9,000 Job Cuts Globally
Also in November, Nissan announced that it was planning to cut 9,000 jobs worldwide — over 6% of its workforce — and reduce its global production capacity by 20%. CEO Makoto Uchida said he would take a 50% pay cut. Honda, meanwhile, cut its net profit outlook for the current business year through March to ¥950 billion. That represents a 14.25% decline from the previous year.
“This deal appears to be more about bailing out Nissan, but Honda itself is not resting on its laurels,” said Sanshiro Fukao, executive fellow at Itochu Research Institute. “Honda’s cash flow is set to deteriorate next year and its EVs haven’t been going so well.”
