Honda and Nissan could be in for a mega-merger

Tuesday, Nikkei Index Financial newspapers have reported on a possible mega-merger between automakers Nissan and Honda. Both companies denied the story. A Honda spokesman said: “We are discussing the possibility of future collaboration between Honda and Nissan across a wide range of areas and in various areas, including the latest reports, but no decisions have been made yet.” Tell AFP. Negotiations are believed to be still in the early stages, but according to Japanese media reports, the companies may make an announcement before December 23.

Honda and Nissan strive to compete with Chinese EVs

If the merger goes through, it will become the world’s third-largest automaker group by sales volume after Toyota and Volkswagen. Honda and Nissan are Japan’s second- and third-largest automakers. They sold about 7.35 million vehicles last year, 3.98 million and 3.37 million respectively, but are competing with cheaper electric vehicles (EVs) from China, such as BYD (Build Your Dreams), which earlier this year It reported record sales and topped quarterly revenue, surpassing Tesla for the first time. In addition to BYD, other Chinese EV makers such as Nio, Zeekr, Xiaomi and Xpeng Motors have all recently broken individual sales records.

Honda and Nissan began putting aside competition in March to collaborate on electric vehicle technology in an effort to catch up with Chinese rivals. Five months later, ties between the two companies have grown stronger as they agreed to collaborate on batteries and other technology. Mitsubishi Motors Corporation (MMC) could also join any potential partnership. In 2016, Nissan acquired a 34% stake in MMC and became its largest shareholder. Last month, it reduced its stake in the company to 24.05%.

Nissan announces 9,000 job cuts worldwide

Also in November, Nissan announced plans to cut 9,000 jobs globally (more than 6% of its workforce) and cut global production capacity by 20%. Chief Executive Officer Makoto Uchida said he would take a 50% pay cut. At the same time, Honda lowered its net profit forecast for the current fiscal year to March to 950 billion yen. This is a 14.25% decrease from the previous year.

“This deal seems to be more about bailing out Nissan, but Honda itself is not content with the status quo,” explain Sanshiro Fukao is an executive researcher at Itochu Research Institute. “Honda’s cash flow will deteriorate next year and its electric vehicle development is not going well.”

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