by Maki Shiraki and Norihiko Shirouzu
TOKYO (Reuters) – Honda and Nissan have opened talks to strengthen ties, two sources said on Wednesday, including discussions about a possible merger, as the two Japanese automakers face increased competition globally from electric vehicle manufacturers.
A possible merger of Honda and Nissan would create a $54 billion (€51.41 billion) company with annual production of 7.4 million vehicles, making it the world’s third-largest auto group in terms of vehicle sales. vehicles, after Toyota and Volkswagen.
These discussions, first reported by the Nikkei newspaper, would allow Honda and Nissan, currently second and third Japanese automakers respectively, to cooperate more in terms of technology and compete with Toyota, the leading Japanese manufacturer.
According to the sources, discussions focused on ways to strengthen collaboration between companies and discussed the possibility of creating a holding company.
The idea of a merger was also put forward, according to one of the sources, as well as ways to cooperate with Mitsubishi, of which Nissan is the main shareholder with a 24% stake.
Honda, Nissan and Mitsubishi said no deals had been announced, although Nissan noted that all three automakers had said in the past they were considering opportunities for future collaborations.
The three Japanese manufacturers are expected to hold a joint press conference in Tokyo next Monday, according to a source familiar with the matter.
Contacted by Reuters, the Renault group, Nissan’s main shareholder, did not comment, indicating that it had no information on the subject.
On the Paris Stock Exchange, the French manufacturer’s shares climbed 5.3% on Wednesday around 08:50 GMT.
According to ODDO analysts, strengthened ties between the two Japanese groups would be relatively positive news for Renault, which could possibly find in a merger project a potential buyer for a significant part of its remaining stake in Nissan or at least one scenario partial exit.
“To a lesser extent and from an industrial point of view, Honda could possibly become a new (small) customer for its Ampère division (like Nissan and Mitsubishi) in Europe,” they point out.
A CHANGING LANDSCAPE
Such an operation, if it were to see the light of day, could become the most important in the automotive sector since the $52 billion merger between Fiat Chrysler and PSA which gave birth to Stellantis in 2021.
Nissan and Honda already entered into a strategic partnership in March to cooperate in the development of electric vehicles in the face of competition from Chinese manufacturers like BYD, a rapprochement which was confirmed in August with an agreement on the joint development of batteries and other technologies.
The two groups are facing a loss of market share in China, where nearly 70% of global sales of electric vehicles were made in November.
However, Nissan’s growing financial and strategic difficulties in recent months have made strengthened cooperation with its big rival more urgent.
Nissan announced in November a $2.6 billion savings plan which includes cutting 9,000 jobs and 20% of its global production capacity, as the group faces a drop in sales in China and in the United States which led to an 85% decline in its profits in the second quarter.
“This deal seems more about bailing out Nissan, but Honda itself is not resting on its laurels,” said Sanshiro Fukao, executive member of the Itochu Research Institute. “Honda’s cash flow is expected to deteriorate next year and its electric vehicles are not doing very well,” he added.
“In the medium to long term, this is a good thing for the Japanese auto industry because it creates a second axis against Toyota,” said Seiji Sugiura, an analyst at Tokai Tokyo Intelligence Laboratory.
Nissan shares ended up nearly 24% on Wednesday on the Tokyo Stock Exchange, while Honda shares fell 3%.
Mitsubishi shares, for their part, soared by almost 20%.
THE TRUMP FACTOR
Any merger would face increased scrutiny in the United States as President-elect Donald Trump has pledged to take a hard line on imported vehicles, including threatening to impose tariffs of 25% on cars shipped from Canada and Mexico.
In particular, he could seek concessions from Honda and Nissan to approve any deal, auto industry officials said.
Both Honda and Nissan produce cars in Mexico for the U.S. market.
Taiwanese company Foxconn, which makes Apple iPhones and is looking to expand its electric vehicle contract manufacturing business, also approached Nissan about an offer, but it was rejected by the Japanese company , said two separate sources familiar with the matter.
Bloomberg reported earlier in the day that Foxconn had approached Nissan about taking a majority stake.
Foxconn did not immediately respond to a request for comment. A Nissan spokesperson declined to comment on Foxconn.
(Reporting by Maki Shiraki in Tokyo and Norihiko Shirouzu in Austin, with contributions from Kantaro Komiya and Yoshifumi Takemoto in Tokyo, Zhang Yan in Shanghai, Ben Blanchard in Taipei and Gilles Guillaume in Paris, written by David Dolan and Miyoung Kim; Camille Raynaud and Diana Mandiá, edited by Blandine Hénault)
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