TOKYO, Dec. 24 (Xinhua) — Japanese automakers Honda Motor and Nissan have agreed to start merger talks, hoping to ascertain a brand new holding firm by round August 2026, pushed by the worldwide auto trade’s fierce competitors in electrification and software program integration, whereas analysts mentioned the alliance faces structural obstacles.
The two corporations on Monday signed a memorandum of understanding to start out discussions towards a enterprise integration underneath a brand new holding firm, creating the world’s third-largest automaker group to compete with U.S. and Chinese rivals within the electrical automobile market.
Honda and Nissan, Japan’s second- and third-largest automakers by quantity, respectively, intention to wrap up negotiations on the phrases of the merger by June 2025, whereas Mitsubishi Motors, Nissan’s associate, will resolve by the top of January 2025 on whether or not to hitch the merger, the automakers mentioned at a news convention.
Each firm would function underneath its personal model within the holding firm that may intention to record shares shortly after it’s established.
The merged entity would create the world’s third largest automaker by quantity after Toyota Motor and the Volkswagen Group, increasing growth of EVs and self-driving tech whereas coming to the rescue of struggling Nissan.
In the primary half of this fiscal yr, Nissan’s web revenue fell greater than 90 p.c primarily as a consequence of sluggish gross sales within the U.S. and China. Following the disappointing earnings report, the corporate introduced it could lower 9,000 jobs worldwide and scale back its world manufacturing capability by 20 p.c.
Nissan will press forward with its restructuring measures earlier than the 2 automakers conclude their merger talks, the businesses mentioned.
Before Monday’s merger talks kicked off, Honda and Nissan already agreed in March to begin a feasibility research on a strategic partnership in EV manufacturing and software program applied sciences to chop prices and enhance competitiveness, with Mitsubishi Motors becoming a member of the talks in August.
“We hope Japanese companies will take steps to respond to these changes and take measures to survive and win amid international competition,” prime authorities spokesman Yoshimasa Hayashi mentioned Monday.
Meanwhile, former Nissan Motor Chairman Carlos Ghosn, who fled Japan whereas awaiting trial on expenses of economic misconduct, mentioned Monday that the deliberate merger cannot work as he sees restricted potential for synergy.
Ghosn mentioned that there was “no complementarity” between the 2 makers, noting Nissan requested Honda for assist “in panic mode.” Analysts, in the meantime, have identified that Nissan and Honda have comparable manufacturing lineups and market operations.
The two corporations have strengths and weaknesses in “the same fields,” Ghosn mentioned, including it’s doable that “they can find synergies for the future … but the premises don’t look good.”
Auto trade consultants mentioned each corporations have developed their companies primarily based on their very own methods. Therefore, it is going to be tough for them to provide vital results shortly via increasing the scope of their collaboration to incorporate batteries, software program, and autonomous driving.
However, within the mid- to long-term, that is good for the Japanese automotive trade because it creates a second axis towards Toyota. Constructive rivalry with Toyota is constructive for the somewhat stagnating Japanese automotive trade when it should sustain with the competitors amid a quickly altering enterprise atmosphere, they added.
“To lead the mobility transformation, we’ve come to think that we need something bolder than just cooperation in some specific fields,” Honda President and CEO Toshihiro Mibe mentioned Monday, “We have reconfirmed that a merger would create synergies in all kinds of fields.”
Obtaining the synergy objectives would assist a mixed Nissan and Honda “become a world-class mobility company” with gross sales income exceeding 30 trillion yen (about 190 billion U.S. {dollars}) and working revenue of greater than 3 trillion yen,” Honda and Nissan mentioned in a joint assertion on Monday.
The new holding firm is predicted to be nominated by Honda, which is able to make up a majority of administrators of the built-in firm. As of Monday, Honda’s market capitalization was at 6.7 trillion yen, whereas Nissan’s was at 1.6 trillion yen.