On December 23, local time, a significant development occurred in the automotive industry as Honda, Nissan, and Mitsubishi entered into a memorandum of understanding (MoU). This agreement signifies the initiation of discussions geared towards a potential merger and consolidation between Honda and Nissan, who are set to explore the operational synergies of their respective businessesThe two companies plan to establish a holding company with equal investment from both sides, while also merging their businesses into subsidiaries under this new corporate structureAs a notable player in the automotive alliance with Nissan, Mitsubishi is also considering its potential role in this significant merger.
The recently signed memorandum emphasizes exploring Mitsubishi's involvement alongside Honda and Nissan, primarily focusing on uncovering collaborative opportunities and leveraging synergistic effects
Initial discussions between the three automakers are expected to revolve around strategic partnerships in technology and sustainability, specifically targeting areas such as intelligent mobility and electrificationMitsubishi is keen on taking part from the outset, with ongoing negotiations to ensure a smoother transition into any potential mergerA firm decision from Mitsubishi regarding its participation in the merger is anticipated by the end of January 2025.
The timeline outlined in this agreement indicates that Honda and Nissan aim to wrap up negotiations by June 2025 and finalize their merger by forming the holding company in August 2026. It is projected that shares for both Honda and Nissan will be delisted from the market between late July and early August 2026. Governance decisions regarding the new holding company suggest that Honda will nominate the majority of board members, including the chief executive officer, underscoring its influential position in the proposed partnership.
If the merger proceeds as planned, the synergy between Honda, Nissan, and Mitsubishi could propel their combined annual sales to a staggering figure of 8 million vehicles, positioning them as the third-largest automotive group globally
- A-Share M&A Boom: What's Driving the Surge?
- Ensuring Reasonable Prices for Agricultural Products
- Booming AI Venture Capital!
- 10-Year Treasury Yield Hovers around 1.7%
- NVIDIA's Vision and Strategy for AI
Following the announcement of the memorandum, shares in Japan's automobile sector experienced a notable riseMitsubishi's stocks surged over 5%, Honda's shares climbed nearly 4%, and Nissan's stock increased by approximately 1.6%.
Amid these developments, Carlos Ghosn, the former chairman of Nissan, recently expressed his skepticism regarding this merger initiativeHe commented that the company’s pursuit of an agreement with Honda is indicative of a "panic mode." In his view, the merger effort represents a desperate move that lacks practicality, given the challenges in finding meaningful synergies in products or market regions for both companies.
In line with the new collaboration, Honda and Nissan intend to establish integrative frameworks, ensuring that their operations merge seamlesslyTheir strategy includes mutual production agreements wherein vehicles could be manufactured across each other's facilities
For instance, Honda is expected to supply Nissan with hybrid vehicle technology, particularly for models suited to the U.Smarket, where Nissan has faced challenges in dealership salesAdditionally, Honda is prepared to utilize Nissan's production capabilities in the U.Ksince its own manufacturing presence in Europe is limited to engine and motorcycle production.
Recent data reveals a concerning trend within Japan's automotive sectorThe eight major Japanese automotive manufacturers recorded a 6% decline in global output for the first half of 2024 (April to September), totaling 11.878 million vehiclesThis marks the first year-on-year decrease since the onset of the pandemic in 2020, highlighting substantial drops from both Honda and Nissan, with reductions of 8.1% and 7.8%, respectively.
This merger between Nissan and Honda stems from an urgent need to address declining profitability among Japanese automakers, who are keen on finding ways to bolster their presence in the increasingly competitive global auto market
Recent financial reports from both Honda and Nissan reflected lackluster performanceNissan's sales revenue for the second quarter of its fiscal year 2025 amounted to 2.99 trillion yen (approximately 140 billion RMB), falling short of expectations of 3.05 trillion yen, resulting in a 5.08% decline year-on-yearFurthermore, the company reported a net loss of 9.34 billion yen (around 450 million RMB), also below the projected profit of 49.07 billion yen.
On the other hand, Honda's financial results fared similarly poor during the second quarter of fiscal year 2024, where the company reported an operating profit of 257.9 billion yen (approximately 12 billion RMB), significantly under the analyst expectations of 431.1 billion yen and illustrating a 15% decline from the previous yearThis downturn signals Honda's first year-on-year decrease in operating profit over the past seven quarters, primarily attributed to declining sales within Southeast Asia and the drastically reduced passenger vehicle sales in China, which saw a remarkable drop of 43%.
The unfolding scenario reflects a complex and rapidly changing landscape within the Japanese automotive industry