Honda and Nissan are moving forward on talks that could move past simple collaboration. The two Japanese automotive giants may set up a joint holding company, according to a report, though they so far are denying that a merger is in the works. Here’s the latest.
Honda and Nissan may be in talks that would result in more than a simple collaboration, but instead a joint holding company.
Facing growing competition in the emerging EV market — especially from low-cost Chinese competitors like BYD — Japan’s Honda and Nissan are in talks that could lead to the creation of a joint holding company, Reuters reported.
But the two manufacturers issued separate statements saying that while they are “exploring various possibilities for future collaboration,” they are not working towards a merger.
The negotiations come during a time of turmoil for the auto industry — and particularly for Honda and Nissan. Both are struggling to gain traction in the global EV market where they are seen lagging key competitors such as Tesla, Volkswagen and General Motors. But Nissan, in particular, is seen by many analysts as being in serious trouble. Some experts warn that it could face collapse within the next two years without help.
What we know
The two manufacturers haven’t hidden the fact that they’ve been talking to one another. This week they issued separate statements noting that, “As announced in March of this year, Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other’s strengths.”
The talks between Honda and Nissan may have expanded to include Mitsubishi.
Japanese news service Nikkei previously broke the news that Nissan and Honda were talking to one another about cooperative projects — and there’s indication that Mitsubishi could be brought into the negotiations. Nissan owns a major stake in the smaller Japanese manufacturer.
Now, it seems, the two companies see a more expansive tie-up as beneficial. They are looking at forming a holding company, according to Reuters, which quotes a well-placed who asked not to be identified “because the information had not been made public.”
The two appeared to dismiss such a possibility — or the prospect of a merger that could follow. They said they would announce more at an “appropriate time.”
Separately, Renault issued a statement indicating it was out of the loop. The French automaker stepped in to bail out the then-failing Nissan 25 years ago, in the process former what is now the Renault-Nissan-Mitsubishi Alliance. But conflicts between Nissan and Renault have led them to pare back their ties which, several sources told Headlight.News, would make it either for Nissan to tie up with Honda.
Troubles ahead
Nissan and Honda have already been working together on other projects.
While both have established a modest presence in the EV market they are seen as lagging behind the industry. Honda’s two key models, including the Protégé, are little more than rebadged versions of the Chevrolet Blazer EV. A second joint venture with Chevy parent General Motors — aimed at developing more affordable electric vehicles — was scrubbed earlier this year. Honda’s own battery-electric program is still in the late stages of development.
Nissan, meanwhile, has seen its once-groundbreaking Leaf become a market afterthought while it hasn’t moved the needle much with its late-to-market Ariya, an electric SUV. Complicating matters, the company’s financial situation has grown increasingly gloomy. It reported a 2.3 billion yen, or $61 million, loss during its most recent quarter, compared to a year-earlier profit of 190.7 billion yen.
In November Nissan’s CEO warned that “extreme” measures were needed, starting with 9,000 job cuts globally. Last week, meanwhile, the second-largest automaker announced the latest in a series of management changes. It has also told dealers — who’ve been hit with their own problems as sales decline — they can combine Nissan and high-line Infiniti brand stores to reduce costs.
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- Ford CEO Wants to Match Price of Chinese EVs — and Plunging Battery Prices Will Help
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EV troubles
A BYD Denza N7, coming off the assembly line above, is one of the reasons a Honda-Nissan linkup make sense.
Even as Honda and Nissan struggle to catch up in the EV — and hybrid — market they face the challenge of holding down development costs while struggling to reverse losses on every battery-electric vehicle they sell. This has been a stumbling block for many key competitors, including industry giant Volkswagen which, company officials have warned, may face its own doomsday scenario.
Adding to the challenge: EV sales haven’t been growing as fast as expected this past year, reducing potential benefits from market growth. At the same time, Chinese automakers, like BYD, are rapidly gaining market share by introducing new models sharply undercutting the price of foreign brands.
A cooperative alliance between Honda and Nissan could help by both sharing vehicle development costs and increasing factory efficiencies.
“The thought that some of these smaller players can survive and thrive is getting more challenging, especially when you add on the complexity of all the additional Chinese manufacturers who have come in and are competing quite strongly,” Edmunds analyst Jessica Caldwell told Reuters. “It’s just sort of necessary to survive, not only to survive, but also just to afford the future.”
BYD’s rise among the ranks of global automakers is part of the reason for the Honda/Nissan discusssions.
Regulatory pushback?
While a tie-up might prove potentially lucrative, it also could trigger pushback by regulators in the U.S., Europe and other parts of the world, analysts warn, especially if a full-on merger were to be involved.
A smaller alliance, especially one where they simply shared development of basic EV technology and, perhaps, the underlying “architectures” for future vehicles, could be easier to win the okay for, Headlight.News was told by several industry veterans. Honda, for example, won approval for a series of tie-ups with GM — though several of those have now wound down. Meanwhile, limited partnerships are becoming an industry norm. Giant Toyota is allying with smaller Japanese brands including Subaru and Mazda, in areas including EVs and vehicle manufacturing.
What happens next is uncertain, but Nikkei reports that Honda and Nissan are expected to sign some form of memorandum of understanding in the near future.
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