Nissan and Honda explore merger to compete with China’s EV Market

The goal is to strengthen its position in the electric vehicle (EV) market, which has been dominated by Chinese companies.

Shares of Nissan rose by more than 20% this week after news of the merger talks spread through media like Nikkei and the Financial Times. In contrast, shares of Honda dropped by more than 2%, while Mitsubishi Motors, in which Nissan is the biggest shareholder, gained 13%.

Both Nissan and Honda have confirmed that they are talking about future cooperation, but nothing is final yet. A Honda spokesperson told Agence France-Presse (AFP) that they are looking at many different ways to work together, but they haven't made any decisions yet.

Nissan also commented, saying that the content of the reports was not confirmed by either company. They mentioned that both companies have been exploring ways to collaborate since March. They plan to share more information with stakeholders when the time is right.

Nissan has been facing some tough years. In 2018, the company’s former boss, Carlos Ghosn, was arrested and later fled Japan while out on bail. This created a lot of uncertainty for the company. Just last month, Nissan announced plans to cut 9,000 jobs, reduce its sales forecasts, and cut its global production by 20%. CEO Makoto Uchida said he would take a 50% pay cut in light of the company’s “severe situation.”

Additionally, Nissan’s long-standing partnership with the French carmaker Renault has had its ups and downs. The two companies are now in the process of "rebalancing" their relationship.

Both Nissan and Honda are turning their attention to electric vehicles (EVs), a market where China has been gaining ground. In 2023, China became the world’s biggest vehicle exporter, mostly because of its strong presence in the EV market. Japanese automakers, including Nissan and Honda, have focused more on hybrid vehicles, which combine electric power and gas engines. This has led to Japanese carmakers losing some of their share in the global EV market.

Honda has announced plans to invest $65 billion in electric vehicles by 2030. This is part of its goal to have 100% of its vehicle sales be electric by 2040. Nissan, too, is making efforts to focus more on EVs. In March, Nissan said that 16 out of 30 new models it plans to launch in the next three years will be “electrified.”

While the merger talks between Nissan and Honda are still in the early stages, there are some concerns. One worry is that a merger could lead to job cuts, which might cause political backlash in Japan. Nissan and Honda are also considering creating a holding company to manage their combined efforts, with Mitsubishi Motors potentially joining the new company in the future.

Although both companies are focusing more on EVs, the shift to electric cars has been slower in Japan. In 2022, only 1.7% of all cars sold in Japan were electric. In comparison, electric cars made up 15% of car sales in western Europe and 5.3% in the United States. In Japan, hybrids (which combine battery power and traditional engines) are much more popular. In 2022, hybrids made up 40% of all car sales in Japan.

As the world focuses more on reducing pollution and addressing climate change, the demand for electric and hybrid vehicles continues to grow. However, there are challenges in the EV market, including high prices, concerns over reliability, limited driving range, and a lack of charging stations.