According to reports, Nissan and Honda consider the merger for the competitive advantage in the global automotive market

According to reports, the Japanese car manufacturers Nissan Motor and Honda Motor are in discussions on a potential merger Nikkei newspaper. The move, which could reshape the global automotive panorama, aims to improve their ability to compete in a sector that moves rapidly towards electric vehicles, autonomous technology and competition intensified by Chinese car manufacturers and Tesla.

The report suggests that the two companies are taking into consideration the possibility of operating under a holding company, with plans to formalize their intentions through a memorandum of understanding in the near future. In addition, the potential merger could bring Mitsubishi Motors, in which Nissan holds a participation of 24%, under the same company umbrella.

If built, the combined enterprise of Nissan-Honda-Mitsubishi would involve annual sales above 8 million vehicles, making it one of the largest car manufacturers in the world. Although significant, this figure would not yet be up to 11.2 million Toyota Motor vehicles in 2023 and 9.2 million sales of Volkswagen in the same year.

Collaboration in the midst of upsetting the industry

Neither Honda nor Nissan confirmed the report. In statements, both companies have indicated that they are exploring the possibility for a deeper collaboration. “The reported content has not been released by our company,” said Honda, adding, “as announced in March of this year, Honda and Nissan are evaluating various opportunities to take advantage of mutual strengths. The updates will be shared with the parties interested at the appropriate time.

This news follows a previous strategic partnership between the two car manufacturers, focused on sharing components and automotive software to reduce costs and simplify operations. This collaboration reflects the growing necessity for car manufacturers to common resources while dealing with the growing pressure to innovate in the face of technological interruption and the intensification of global competition.

If the merger advances, it would mark the largest agreement in the automotive sector since Fiat Chrysler has merged with the French PSA group to form Stellantis in January 2021.

Rational for merger

Analysts and consultants in the sector have long supported consolidation in the automotive sector as a means of managing development costs for the stars for electrical and autonomous vehicles. With Chinese car manufacturers quickly earn market shares in the key regions and Tesla maintains its domain in the segment of entirely electrical vehicles, Legacy car manufacturers are subjected to immense pressure to adapt.

A merger between Nissan and Honda could allow companies to share research and development costs, simplify supply chains and reach economies of scale. It would also allow car manufacturers to present a united front in the increasingly competitive global market, in particular in the race to produce electric vehicles at affordable prices.

Market response

The potential merger has already aroused significant market activity. Tuesday, the shared shares in the United States of Honda have increased by about 1%, while Nissan's desk shares have increased by more than 11%. The jump in Nissan actions comes while the company continues its renovation efforts, which have included the refocalization of profitability and the reduction of costs after years of financial challenges.

A strategic pivot

The merger interviews indicate a fundamental moment for both companies. Nissan, a global leader in the innovation of electric vehicles with his leaf model, has fought to maintain his competitive advantage in recent years. In the meantime, Honda has actively pursued progress in the technology of electric and hydrogen cells in fuel, but has faced challenges in the downsizing of production to satisfy the growing demand.

By combining the resources, the two car manufacturers could accelerate their transition to cleaner energy vehicles and improve their ability to compete with established players such as Toyota and Volkswagen, as well as with the most recent competitors from China.

The way to go

While the merger remains unconfirmed, the implications of this union could be profound for the global car industry. In case of success, the combined entity could compete with the scale and technological skills of the largest car manufacturers in the world, positioning itself as a formidable competitor in the rapidly evolving market.

While the automotive panorama continues to change, the mergers and strategic alliances are becoming essential tools for survival and growth. Whether this reported merger materializes or not, underlines the growing urgency for traditional car manufacturers to adapt to the challenges of a rapidly evolving sector.