Japanese car makers Honda and Nissan are in talks over a potential merger to help them survive the slowing electric car market, as they continue to struggle against Chinese manufacturers such as BYD, Geely and SAIC as well as American EV powerhouse, Tesla.
Nikkei reported on Tuesday that the merger would likely include Mitsubishi Motors, of which Nissan is a 24 per cent stakeholder.
The Japanese car manufacturing giants are said to be considering operating under a holding company and will sign a memorandum to that effect, but the discussions are in early stages and neither company has confirmed that a deal has taken place.
The two companies are expected to confirm the talks next week, as reported by Japanese TV channel TBS.
Nissan – which is Japan’s second biggest car manufacturer, with Honda third – has been struggling to find ways out of its estimated $5.6billion debt.
At the start of December, reports suggested Nissan is on the brink of collapse and had ‘12 to 14 months to survive’ as it couldn’t keep up with cheap Chinese EV imports.
Honda and Nissan are reported to be in talks about a potential merger to help them survive in the growing electric car market
In March, Honda and Nissan agreed to a strategic EV partnership, which in August was extended to batteries and technology.
However, the latest merger would be a stronger resource-sharing arrangement to benefit both companies against cheaper rivals.
While the union would raise questions about British jobs – Nissan employs 7,000 workers in the UK – it would see the firms amalgamate a combined worth of £41bn.
Since the merger reports surfaced, Nissan shares have surged 23.7 per cent – the firm’s best day since 1985 – and Mitsubishi’s also jumped 20 per cent. Honda’s shares have slipped three per cent.
A spokesperson for Nissan told This is Money: ‘The content of the reports that Honda, Nissan and MMC are considering a business integration is not based on an announcement from our company.
‘As announced in March and August of this year, Nissan, Honda, and MMC are considering various possibilities for future collaboration including the content of the report, but no decisions have been made.
‘If there are any updates, we will inform all stakeholders at the appropriate time.’
Chinese firm BYD, which stands for Build Your Dreams, recently bested Tesla quarterly revenue sales, Bloomberg reported, with revenue for the three months ending September 30 at $28.2 billion
Nissan’s worldwide sales slumped by 3.8 per cent to 1.59million vehicles in the first half of the current financial year, largely driven by a 14.3 per cent fall in China
Nissan, which has a huge factory in Sunderland that’s the biggest single plant for UK car production, has endured a troubling year.
The firm’s worldwide sales slumped by 3.8 per cent to 1.59 million vehicles in the first half of the current financial year, largely driven by a 14.3 per cent fall in China and a dip in demand in the US – the two biggest markets.
Then in December the announcement was made Nissan would axe 9,000 jobs globally – and 20 per cent of its manufacturing capacity, in order to reduce costs by £2bn.
The company risks running up its largest-ever debt by 2026, potentially owing as much as $5.6billion, it is suggested.
‘The root of the problems stem from a wave of cheaper EV alternatives coming from China that are flooding the global market and stealing market share away from the Japanese company,’ Forbes reported.
CEO Makoto Uchida earlier this month said: ‘This has been a lesson learned and we have not been able to keep up with the times.
‘We weren’t able to foresee that hybrid electric vehicles and plug-in hybrids would be so popular.’
Chief executive Makoto Uchida, pictured in September 2023, has taken a 50% pay cut in response to the company’s financial struggles
While Nissan has struggled, rivals are enjoying an increasing stronghold on the EV market.
BYD and Tesla have been seeing a sales surge with combined global sales of 7.4 million vehicles in 2023. In November, China alone accounted for 70 per cent of global EV sales.
BYD revenues for the three months ending 30 September were $28.2bn while Tesla’s sales were $25.2bn in the same period, Bloomberg reported.
The other party at play in the deal is French car giant Renault, which owns a 35.8 per cent stake in Nissan.
Renault was reportedly wanting to reduce its stake in Nissan following its recent performance and this merger could provide an ‘exit route’.
Equity analysis by Jeffries says: ‘On our estimates, in a nil-premium merger, at last night’s closing prices, Honda shareholders would control ~84 per cent of the combined equity while Renault’s 35.8 per cent stake (€2.78bn) would be diluted to a 5.8 per cent stake (2.8 per cent for the 17.1 per cent core holding and 3 per cent for the shares held for sale).’
In response to the reports Honda commented: ‘The information in the report seen on 17 December was not provided by our company. As announced in March of this year, Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other’s strengths.
‘We will inform our stakeholders of any updates at an appropriate time.’
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