The Honda-Nissan-Mitsubishi merger looks increasingly likely to happen. The tie-up could save Nissan, which is experiencing severe financial troubles. Creating a giant Japanese automotive holding company would create an entity that’s more globally competitive than the companies’ current positions.
The merger’s structure is still a mystery. Renault holds a 36-percent interest in Nissan, and it’s unclear whether Honda would acquire the entire stake. One report suggests that Taiwan’s Foxconn might purchase some of Nissan.
What Does Honda Gain From Merging With Nissan
Combining with Honda allows Nissan to survive. However, Honda’s perspective on the advantages of this tie-up is more complicated. Analysts believe it could take three to five years after the merger to determine whether the move was successful.
“Ideally it would’ve been a healthy and financially sound company, rather than Nissan,” Julie Boote, a market analyst at Pelham Smithers Associates, told Automotive News about the merger.
Honda and Nissan have strong presences in major markets like North America, Europe, and Japan. However, they are struggling in China. “Both Honda and Nissan have significant overcapacity issues in China, which requires optimization before any merger talks, James Hong, an analyst at Macquarie Securities Korea Ltd., said.
It’s Not All Bad
This collaboration has a few obvious benefits for Honda, such as access to Nissan’s factories and technology. Sharing parts and negotiating better deals with suppliers could also lead to potential economies of scale. For example, Nissan might consolidate platforms and share research and development investments.
Both companies have robust manufacturing footprints in the United States. Nissan has two vehicle assembly plants and a powertrain factory in the country, and Honda operates 12 facilities, producing around 3.5 million products a year.
President Trump is threatening to enact tariffs on a variety of imported products when he takes office. Nissan and Honda’s ability to build a significant number of vehicles in the United States might help them be more price competitive against automakers that need to import products.
TopSpeed’s Take
There will be lingering questions about the Honda-Nissan-Mitsubishi merger until the trio officially announces the future strategy. Even then, we need to wait years to see if the plan is a success. Expect to read plenty of news about what these companies are doing as the tie-up moves forward.
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