Reports out late Tuesday night say that Honda Motor Co. and Nissan Motor Co. are looking into the possibility of merging in order to better compete with foreign electric car makers like BYD and Tesla Inc.
Nikkei Asia was the first to report late Tuesday that Japan’s second- and third-largest automakers are planning to join and are thinking about running their business through a holding company. The Wall Street Journal, Bloomberg News, and the New York Times all wrote about the possible merger. If it happened, it would make one of the biggest car companies in the world.
Honda and Nissan said in a joint statement, “As announced in March of this year, we are looking into different ways we could work together in the future, building on each other’s strengths.” “Any updates will be shared with our stakeholders at the right time.”
After the news came out, Nissan shares (7201 +23.70%) went up 23% in Tokyo market, while Honda shares (7267 -3.04% HMC +0.96%) went down 3%. Nissan stock has dropped about 25% so far this year. Honda’s shares in Japan are down about 15% this year, while its shares in the U.S. are down about 18%.
Mitsubishi Motors 7211 +19.65% stock went up 19%. Nissan owns almost 25% of the company, and Nikkei Asia said that Mitsubishi could be part of any holding company.
In Paris, Renault RNO +6.38%, which owns a lot of Nissan shares, saw their prices rise by 5%.
Nissan and Honda announced earlier this year that they would be working together to make electric cars and auto-intelligence technology. They said they were doing this because they both face “common challenges.”
This year, Tesla and cheaper Chinese automakers have made big gains into China and Southeast Asia, causing sharp drops in sales for both Honda and Nissan. As a result, they have had to cut production capacity as demand around the world has dropped.
Japanese companies are behind the rest of the world when it comes to making electric cars. Reuters reported last week that Chinese electric vehicle maker BYD is on track to sell more than 4 million units this year, more than both Ford and Honda.
In the next 12 months, 002594 +0.65% might be able to sell 6 million cars.
In 2024, Tesla TSLA +3.64% plans to sell about 1.75 million cars.
Last year, Honda sold about 4.2 million cars and Nissan sold about 3.4 million. The top two companies in the industry, Toyota Motor Corp 7203 +2.02% and Volkswagen AG VOW +1.12%, sold about 11.2 million and 9.2 million cars, respectively, in 2023.
“When the three companies join together, they will make an auto group that sells 8 million cars.” In a note to clients, Citi analyst Arifumi Yoshida said, “Our first thought is that a merger would be bad for Honda but good for Nissan and Mitsubishi Motors.”
“Because Honda is competitive in motorcycles and hybrid electric vehicles, and because its brand is strong, we think it will be able to take on competitors for the next 5 to 10 years.” “However, the choice could be seen as one that was made in preparation for the complete transformation of the auto industry,” Yoshida said.
The expert said that Honda share prices will need to see a “clear demonstration of merger benefits” before they go up even more.
A group of Jefferies analysts lead by Philippe Houchois said that a deal would continue to split Japanese automakers into two main groups, make the company bigger, and speed up the development of new technologies.
A source told Bloomberg that iPhone maker Hon Hai Precision Industry Co., also known as Foxconn, asked Nissan about a stake, which sped up talks between the two Japanese automakers. Over the past few years, Foxconn has been making moves into the electric vehicle market.
