Nissan and Honda plan to enter merger negotiationsreported the Japanese business newspaper Nikkei. According to the newspaper, the domestic partners expect to sign a memorandum of understanding soon. Both companies will reportedly also want to be included in this transaction the third Japanese concern, Mitsubishi Motorsin which Nissan is the largest shareholder – it holds 24 percent. shares.
Nissan and Honda have already established a strategic partnership. In March this year, both companies established cooperation in the production of key components for electric vehicles.
The third car group in the world
The prospective merger could create the third largest car group in the world in terms of vehicle sales. According to Citi analysts Nissan-Honda-Mitsubishi sales may reach 8 million cars per year. The combined three companies would be ahead only of Toyota Motor and crisis-hit Germany’s Volkswagen.
Peter Wells, professor of business and sustainability at Cardiff Business School’s Center for Automotive Industry Research, described the merger reports as a “really important” development – one that could help Nissan and Honda combine assets, reduce business costs and create the technologies they need for the future.
A thorny road to fusion
However, the megamerger is expected to face several hurdles, notes CNBC. Analysts have raised concerns about the likelihood of political control in Japan, given potential job cuts if a deal is finalized. The European car company Renault, which owns 36 percent, must also be involved in the entire transaction. shares in Nissan, making it the largest shareholder of the Japanese company. Therefore, Renault’s consent will be crucial to any deal.
According to Bloomberg sources, Renault is open to talks about the merger of Nissan and Honda, as the French car manufacturer is looking for a way to isolate itself from the crisis that is plaguing its long-time Japanese partner.
Apple’s supplier was also involved in the entire transaction, Foxconn, which asked Nissan to take over the sharesBloomberg reported on Wednesday, citing an anonymous source. According to Central News Agency, Jun Seki, director of strategy at Hon Hai EV, informed Nissan of Foxconn’s interest in buying its shares, but Nissan did not respond favorably. As a result, Seki turned to Renault, which owns 36 percent. Nissan shares.
Nissan-Honda-Mitsubishi and Chinese competition
Asked on CNBC’s “Street Signs Europe” whether the consolidation of Nissan and Honda might be a good way to combat competition from Chinese electric car makers, Professor Wells said the deal could be described as a “traditional solution.”
However, in his opinion these actions are too late to effectively compete in the EV industry with the Chinese in their key markets in a short timebecause the current ones lack the technology and the right product.
“Nissan in particular is lagging behind the US market. That’s their main problem and they can’t fix it very quickly,” Wells added.
According to CNBC, Akira Kishimoto from JPMorgan has a similar opinion about barriers. In his view, Honda needs to demonstrate how it will manage large battery electric cars and battery investments in Canada,” Kishimoto said.
However, Arifumi Yoshida from Citi said that the merger will likely have a negative impact on Honda but a positive impact on Nissan and Mitsubishi.
Merger or rather partnership?
Lucinda Guthrie, editor-in-chief of Mergermarket, told CNBC’s “Street Signs Europe” that Honda’s merger with Nissan isn’t entirely unexpectedas both companies previously announced their partnership earlier this year.
“Some reports I have seen claim that this happened as a result of Foxconn’s approach to Nissan. Now, given this particular transaction, I wonder whether it will be a radical merger or rather a partnership”, added Guthrie.
As with recent events, Honda recently tested a partnership with General Motors before ultimately deciding to move on from the idea.
Speculation about consolidation between Honda and Nissan could follow a similar path to GM, Guthrie said.
