Honda, Nissan Eye Merger to Strengthen EV Market Presence

AFP/APP

Tokyo: Japanese automakers Honda and Nissan are reportedly set to begin discussions on a potential merger to bolster their position in the competitive electric vehicle (EV) market, where Chinese brands like BYD are rapidly advancing.

At the same time, Taiwanese electronics giant Foxconn has approached Renault with an offer to acquire its 35 percent stake in Nissan, according to Taiwan’s Central News Agency.

Challenges in the Auto Industry

The global auto industry is facing tough times due to subdued consumer spending and fierce competition, particularly in China. While Japanese automakers have historically prioritized hybrids, China has emerged as a leader in EV production, overtaking Japan as the largest vehicle exporter last year.

Government support for EVs has fueled this growth, leaving foreign brands, including Nissan, struggling to keep up.

In November, Nissan warned of a “severe situation” as it announced 9,000 job cuts and revealed a 93 percent drop in first-half net profits. With billions in debt maturing in the next two years, the company sees a merger with Honda as a potential lifeline.

Foxconn’s Interest

Nissan’s financial struggles have also attracted attention from other players. Foxconn, known for manufacturing Apple iPhones, recently approached Renault to acquire its stake in Nissan. This follows a failed attempt by Foxconn to gain a majority stake in the Japanese automaker.

Jun Seki, a former Nissan executive now with Foxconn, reportedly traveled to France to present the proposal to Renault, signaling the electronics giant’s interest in entering the EV market.

Honda’s Strategic Advantages

Honda, Japan’s second-largest automaker, views a merger as an opportunity to achieve economies of scale. The partnership could significantly reduce costs and expand product lineups, particularly in EV and battery development.

The two companies had already agreed in March to explore joint work on EV software and components, with Mitsubishi Motors joining the initiative in August. Analysts believe this collaboration reflects the rising costs and risks in EV development, making partnerships essential.

While Honda’s market capitalization of $41.2 billion far surpasses Nissan’s $10.5 billion, experts predict that governance of the merged entity could become a contentious issue.

Global Impact

A merger between Honda and Nissan would create the world’s third-largest automaker, trailing only Toyota and Volkswagen. Together, Honda, Nissan, and Mitsubishi sold four million vehicles in the first half of the year, compared to Toyota’s 5.2 million.

While Honda aims to electrify its lineup by 2040, it has faced setbacks in EV technology. Its collaboration with General Motors on a joint vehicle project failed, and the Afeela brand it launched with Sony has yet to produce a car. Meanwhile, Nissan’s once-groundbreaking EV, the Leaf, has struggled to remain competitive.

Experts believe the merger could also signal the gradual dissolution of Nissan’s longstanding alliance with Renault, which has been marked by tension. Unlike the strained partnership with Renault, Honda’s financial stability and technological focus make it a more compatible partner for Nissan.

“This partnership has the potential to redefine the global automotive landscape, but navigating the complexities of such a merger will be no small task,” said Tatsuo Yoshida of Bloomberg Intelligence.