Vithanage Erandi Kawshalya Madhushani Jade Times Staff
V.E.K. Madhushani is a Jadetimes news reporter covering Business.
Early Talks Signal Ambitions to Compete in Booming EV Industry Amid Challenges in China
Honda and Nissan, two of Japan’s leading automakers, have entered early discussions regarding a potential merger to bolster their ability to compete in the rapidly evolving electric vehicle (EV) market, particularly in China.
Discussions in Early Stages
The merger talks, first reported by the Nikkei, remain in the exploratory phase, and there is no guarantee of a finalized deal. Both Honda and Nissan have issued identical statements confirming they are "exploring various possibilities for future collaboration, leveraging each other’s strengths."
While neither company has denied the reported discussions, they clarified that this information had not been officially announced. Any updates, they said, would be shared with stakeholders in due course. Japanese media outlets have suggested that an official acknowledgment of the talks could come as soon as next week.
Merger Aims to Address Industry Shifts
The automotive industry is undergoing a seismic shift toward electrification, with growing competition from Chinese EV manufacturers and established global players like Tesla and BYD. In China, which accounted for nearly 70% of global EV sales in November, Honda and Nissan have faced declining market share, underscoring the urgency for strategic action.
Edmunds analyst Jessica Caldwell emphasized the competitive landscape:
“Smaller players are finding it increasingly challenging to survive and thrive, especially with the influx of strong Chinese competitors. A merger might be necessary, not just for survival, but to afford the future.”
Honda and Nissan, with combined global sales of 7.4 million vehicles in 2023, are aiming to reposition themselves as stronger contenders in the EV market, which is being rapidly transformed by innovations and lower-cost offerings from Chinese brands like BYD.
Previous Collaborative Efforts
In March 2024, Honda and Nissan agreed to explore a strategic partnership to develop EVs. By August, the two automakers deepened their collaboration, announcing joint efforts in battery technology and other key areas.
The companies also partnered with Mitsubishi Motors to explore intelligence and electrification initiatives, signaling a broader alliance strategy. Given Nissan's significant stake in Mitsubishi, there is speculation that Mitsubishi could become part of any future merger.
Market Reactions and Political Scrutiny
News of the discussions has already stirred market activity. Nissan's shares surged by over 23% in Tokyo, while Honda shares fell 3%, and Mitsubishi Motors saw an almost 20% jump.
However, a potential merger could face significant hurdles, including political scrutiny in Japan. Analysts warn that such a deal could lead to job losses, making it a politically sensitive issue.
Additionally, Nissan's longstanding alliance with Renault may need to be restructured or unwound to facilitate a merger with Honda.
Expert Opinions: Will a Merger Solve Deeper Issues?
Despite the potential benefits of combining resources, some experts remain skeptical about whether a merger could address deeper challenges facing Honda and Nissan. Jesper Koll, from Monex Group, questioned the merger's strategic impact:
“Is this really just rearranging the deck chairs on the Titanic? Neither Honda nor Nissan currently offers products or technologies that global consumers are clamoring for.”
While the merger could improve operational efficiency and help weather the storm of declining sales and intensifying competition, Koll noted that it may not be enough to create a "new national champion" in the EV race.
Global EV Landscape and Strategic Necessity
The merger discussions highlight the immense pressure on traditional automakers to adapt to an electrified future. China’s booming EV production, coupled with companies like BYD outperforming global giants like Tesla in quarterly revenue, underscores the urgency for legacy automakers to innovate and scale up quickly.
For Honda and Nissan, a merger could provide the resources needed to accelerate development, reduce costs, and establish a stronger foothold in key markets. Whether the partnership materializes into a transformative alliance remains to be seen.
