You have probably all heard the news about Nissan, which has been struggling for some time, merging with Honda. We've grown accustomed to such marriages among European automotive giants going through similar tough times (see: VAG-PSA-Fiat Group-Stellantis), but we don't see this as often among Japanese companies. At first glance, this announcement may seem like a survival effort by two brands struggling to keep up with the electric/digital transformation. Let’s dive between the lines and assess its chances of success.

1. Nissan and Honda announced plans to share costs and collaborate on electric vehicles. The two Japanese brands stated they are discussing a merger that could create the world's third-largest car manufacturer by sales volume. In the coming years, we are likely to see twin models from these two brands sharing the same platform but differing in design.
2. Following the announcement of merger talks, Nissan's shares gained over 30% in two trading days, while Honda's shares lost about 5% over the same period. This stock market movement alone indicates how this partnership will affect the two brands differently.
3. The Japanese government is concerned about the automotive sector's competitiveness against China. Thus, the government, which subsidizes R&D efforts, stated it would welcome the merger. However, as we will discuss shortly, the state's influence over Japan's automotive sector goes far beyond subsidies, making this more of a communal effort.
4. Nissan is also the largest shareholder in Mitsubishi Motors and continues technological collaboration; Mitsubishi is widely expected to join this alliance. While Honda's market value is 6.74 trillion yen (£34 billion), Nissan's is 1.67 trillion yen, and Mitsubishi's is 717 billion yen. In 2023, Honda sold 3.8 million vehicles, with Nissan not far behind at 3 million. Yet, Honda's value is four times that of Nissan, highlighting a stark efficiency gap. Mitsubishi sold 700,000 vehicles in the same year.
5. Nissan has not yet fully recovered from the turmoil following the arrest of former chairman Carlos Ghosn in late 2018, during its 25-year alliance with French carmaker Renault (mass layoffs, factory closures, and sales declines). Accused of underreporting income and removed from his position, Ghosn denied the allegations and famously fled Japan a year later, hidden inside a box on a private jet.
6. Carlos Ghosn, who earned acclaim during his tenure at Nissan for decisions and actions that made the Renault-Nissan alliance the world's largest carmaker at the time, commented on the merger: Honda is not happy with the merger; it's an imposition by the Ministry of Economy, Trade, and Industry (METI). Creating synergy with Nissan is impossible because they don't complement each other; they are similar brands offering similar products in similar markets. Engineering dominates both companies, egos are high, and it will be very difficult for them to agree on what technology or solution is best.
7. A week before the announcement, Foxconn, the Chinese electronics company that manufactures Apple products like the iPhone, had offered to buy Nissan. The Japanese government partly pushed Honda into the deal out of fear of such a scenario. In the future, Chinese companies might choose to restructure weak automotive players like this rather than create new EV brands from scratch. (See: Volvo, MG, Lotus)
8. Renault and Nissan resolved years of tension last year, allowing Nissan to regain independence. Renault gradually reduced its stake in Nissan from about 43% to 15%. The remaining stake is expected to be transferred to Honda soon.
9. According to a Kerrigan Advisors survey of 600 car dealerships, over half of respondents said they do not trust Nissan. The company's founder, Erin Kerrigan, noted that many Nissan dealerships are losing money and that those looking to sell their dealerships are struggling to find buyers.
10. Regarding electric vehicles, Nissan has transitioned from a pioneer to a lagging player. While the Nissan Leaf, launched in 2010, was among the first fully electric cars, it failed to achieve expected sales success. In recent years, the brand has focused on its hybrid technology called e-Power. Meanwhile, Honda discontinued its e model, which struggled to find buyers due to its low range and high price, just three years after launch. Its current electric SUV, the e:Ny1, is also dealing with low sales and recalls due to a software issue in its charging control unit.

Sources

• The Wall Street Journal
• Bloomberg
• The Guardian
• Kerrigan Advisors
• SpeakEV