Honda, Nissan Merger Could Create Auto Giant

On December 18, significant discussions emerged regarding the potential integration of two of Japan's automotive giants, Honda and NissanReports indicated that these companies are in the process of formulating a holding company that would encompass both entities, signaling a strategic move within the ever-evolving automotive marketConcurrently, Nissan's stake in Mitsubishi Motors, possessing a considerable 24% share, raises the possibility of Mitsubishi's inclusion in this newly proposed holding companyShould this alliance come to fruition, the combined annual sales of the three companies would soar to approximately 8 million vehicles, positioning them as the third-largest automotive group globally.

In response to inquiries from the press, representatives from Honda China and Nissan China clarified that the aforementioned merger discussions were not officially announced by either company

While it's true that Honda, Nissan, and Mitsubishi are exploring various avenues for collaboration, no conclusive decisions have been reached at this juncture.

The news of a potential merger has had a noticeable impact on the stock market, with shares in Honda, Nissan, and Mitsubishi experiencing significant fluctuationsOn the day of this report, Nissan saw its stock price surge by over 20% at the market's opening, while Mitsubishi's shares also jumped to their limit, expanding gains to 20%. In contrast, Honda's stock faced an initial decline of 3.4%, underscoring the volatility within the automotive sector attributed to uncertainty surrounding these discussions.

In a candid commentary on the merger speculation, Honda's Executive Vice President, Shinji Aoyama, remarked that the company is indeed contemplating several options, including mergers, capital partnerships, or the establishment of a holding company as part of their comprehensive strategy moving forward.

The collaboration among the three Japanese manufacturers—Honda, Nissan, and Mitsubishi—has undeniably intensified throughout 2023. Earlier this year, in March, Honda and Nissan formalized a memorandum of understanding to collaborate on electric vehicle (EV) initiatives, covering aspects such as joint procurement, collaborative powertrain development, and standardized components

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This strategic alliance seeks to leverage resource integration to reduce costs and enhance competitiveness within the ever-growing EV market.

In July, Mitsubishi joined forces with the Honda-Nissan partnership, and the collective aim has been to standardize software systems for vehicle control, beginning significantly with Mitsubishi modelsIn August, all three manufacturers jointly signed a strategic cooperation agreement, committing to work on pure electric vehicle advancements and artificial intelligence integration, sharing development costs to withstand competitive pressures, particularly from emerging Chinese automakers seeking to capture market share.

By November, Nissan and Mitsubishi reached an agreement to establish a joint venture focused on services related to autonomous driving and electric vehicle battery usage, expected to be operational by March 2025, with equal ownership from both companies

This developing relationship highlights a broader trend across the global automotive industry, as technological and competitive landscapes evolve rapidly, reshaping market participants.

Data reveals that Japan's eight major automotive corporations are bracing for a challenging landscape, with projected first-half production in 2024 falling to 11.88 million vehicles, marking a decline of 6% from previous yearsThis downturn is particularly significant as it marks the first dip in production during the first half of the year since the onset of the COVID-19 pandemic

Notably, Toyota's output dropped by 7%, Honda by 8.1%, and Nissan by 7.8%, as these companies grapple with both external and internal pressures.

Furthermore, the market share of Japanese cars in China has been in a downward spiral for three consecutive years, plummeting from 24.1% in 2020 to just 17% in 2023. Data from the Passenger Car Association for November reveals that Honda’s terminal sales in China were just 76,773 vehicles, reflecting a staggering 28.02% year-on-year decline, while Nissan’s sales for both passenger and light commercial vehicles amounted to 63,545 units, down by 15.14% year-on-year.

Interestingly, in November, only Toyota managed to see an uptick in sales in China, reaching 176,000 units, a year-on-year growth of 7.0%. This resurgence can be attributed to effective policy measures encouraging vehicle trade-ins and the launch of new models that boosted its market presence after months of continuous decline.

Looking ahead, it is plausible that Honda, Nissan, and Mitsubishi will deepen their collaborative efforts in the realms of electrification and intelligent technologies