Japanese automakers Honda and Nissan are in talks about a possible merger to help them survive the slowing electric car market, as they continue to battle Chinese manufacturers such as BYD, Geely and SAIC, as well as American electric vehicle powerhouse ,Tesla.
Nikkei reported Tuesday that the merger would likely include Mitsubishi Motors, of which Nissan is a 24 percent shareholder.
The Japanese car manufacturing giants are said to be considering operating under a holding company and will sign a memorandum to that effect, but talks are in the early stages and neither company has confirmed that a deal has been reached.
The two companies are expected to confirm the talks next week, Japanese television channel TBS reported.
Nissan, which is Japan’s second-largest automaker, followed by Honda in third, has been struggling to find ways to get out of its estimated $5.6 billion in debt.
In early December, reports suggested that Nissan was on the verge of collapse and had “12 to 14 months to survive” as it could not keep up with Chinese imports of cheap electric vehicles.
Honda and Nissan are reportedly in talks about a possible merger that will help them survive in the growing electric car market.
In March, Honda and Nissan agreed to a strategic partnership for electric vehicles, which in August expanded to batteries and technology.
However, the latest merger would be a stronger resource-sharing deal that would benefit both companies over cheaper rivals.
While the union would raise questions about British jobs (Nissan employs 7,000 workers in the UK), it would see the companies merge a combined value of £41bn.
Since the merger reports emerged, Nissan shares have risen 23.7 percent – the company’s best day since 1985 – and Mitsubishi’s are also up 20 percent. Honda shares have fallen three percent.
A Nissan spokesperson told This is Money: ‘The content of reports that Honda, Nissan and MMC are considering a business integration is not based on an announcement from our company.
‘As announced in March and August of this year, Nissan, Honda and MMC are considering various possibilities for future collaboration, including the content of the report, but no decisions have been made.
“If there is any update, we will inform all interested parties at the appropriate time.”
Chinese company BYD, which stands for Build Your Dreams, recently surpassed Tesla’s quarterly revenue sales, Bloomberg reported, with revenue for the three months ending September 30 at $28.2 billion.
Nissan’s global sales fell 3.8 percent to 1.59 million vehicles in the first half of the current financial year, largely driven by a 14.3 percent drop in China.
Nissan, which has a huge factory in Sunderland that is the UK’s largest car production plant, has endured a worrying year.
The company’s global sales fell 3.8 percent to 1.59 million vehicles in the first half of the current financial year, largely driven by a 14.3 percent drop in China and a drop in demand in the United States, the two largest markets.
Then, in December, the announcement was made that Nissan would cut 9,000 jobs worldwide (and 20 per cent of its manufacturing capacity) to cut costs by £2bn.
It is suggested that the company is at risk of racking up the largest debt in its history by 2026, potentially owing up to $5.6 billion.
“The root of the problems stems from a wave of cheaper EV alternatives from China that are flooding the global market and stealing market share from the Japanese company,” Forbes reported.
CEO Makoto Uchida said earlier this month: “This has been a lesson learned and we haven’t been able to keep up.”
“We were not able to foresee that hybrid electric vehicles and plug-in hybrids would be so popular.”
CEO Makoto Uchida, pictured in September 2023, took a 50% pay cut in response to the company’s financial difficulties.
While Nissan has struggled, its rivals are enjoying increasing strength in the electric vehicle market.
BYD and Tesla have seen a surge in sales with combined global sales of 7.4 million vehicles in 2023. In November, China alone accounted for 70 percent of global electric vehicle sales.
BYD’s revenue for the three months ending September 30 was $28.2 billion, while Tesla’s sales were $25.2 billion in the same period, Bloomberg reported.
The other party at stake in the deal is French auto giant Renault, which owns a 35.8 percent stake in Nissan.
Renault reportedly wanted to reduce its stake in Nissan following its recent performance and this merger could provide an “exit route.”
Share analysis by Jeffries says: “By our estimates, in a no-premium merger, at last night’s closing prices, Honda shareholders would control ~84 percent of the combined equity, while the 35.8 percent stake percent of Renault (2,780 million euros) would be diluted”. to a 5.8 percent holding (2.8 percent for the main 17.1 percent holding and 3 percent for shares held for sale).
In response to the reports, Honda commented: ‘Our company did not provide the information in the report seen on December 17. As announced in March of this year, Honda and Nissan are exploring various possibilities for future collaboration, building on each other’s strengths.
“We will inform our stakeholders of any updates at the appropriate time.”
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