Product Strategy
Elementor #5676
December 23, 2024
Nissan and Honda have announced plans to form a joint company by June 2025. Nissan CEO Makoto Uchida and Honda CEO Toshihiro Mibe announced during a joint news conference in Tokyo on December 23, 2024.
They made this plan, with the goal to become the third-largest automaker in the world by sales in August 2026, its current holder being Hyundai Motor Group, which also operates under a similar joint venture Hyundai and Kia. The new joint company plans to achieve a combined annual sale of USD 192 billion and an operating profit of USD 19 billion. The two companies have signed a memorandum of understanding to begin merger discussions. Both companies want to integrate their knowledge, human resources, and technology to create synergies and enhance their competitiveness in the market. Where, their productive focus will mainly be electric vehicles (EVs) and self-driving vehicles.
They will operate under a joint holding company and will start operations by August 2026. While Honda will lead the new management, both brands will still retain their respective identities and principles. The headquarters will be in Tokyo, Japan. However, the company have a global presence, including in the United States.
The stock market has received the announcement positively. Honda U.S. listed shares surged by 15% in premarket trading, showing investor confidence in the future of the synergy and potential cost savings.
Now, mergers or joint companies in the automotive industry are not entirely new. In 1999, Renault allied with Nissan, allowing them to reap benefits such as cost-cutting and boosting their innovation, allowing them to expand their market reach. Another example would be the Fiat-Chrysler merger, which became part of Stellantis after merging with PSA Group in 2021. This merger enabled them to pool resources, optimize production, and strengthen their position in the global market. Perhaps the success of these mergers was a motivator in securing this partnership between Honda and Nissan.
You see, Nissan’s global sales declined by 3.0% in 2024 compared to 2023, with significant drops in the European and Chinese markets. Honda faced an even tough year, with global sales dropping by 11.4%, according to Statista, with notable declines in the US and Asian markets.
Industry experts see this merger as a possible move for both companies to strengthen their market position in regions such as India and China, where they have struggled to improve their competitiveness in the industry. The competition from Chinese EV and self-driving vehicle companies like BYD, Nio, Xpeng Motors, and Li Auton, which are known for their affordable pricing, has been intense in these regions.
But will they reap the same benefits?
There are a few challenges this merger might face. With the United States, where regulations are tough and rules around electric vehicles and self-driving tech are constantly changing, this could become a roadblock. For example, when governments roll back EV-friendly policies, they might reduce or remove financial incentives like subsidies, tax breaks, or rebates that make electric vehicles more affordable for consumers, slowing down the growth of the EV market.
As without these financial incentives, EVs can be more expensive than traditional gasoline cars. Which means Nissan and Honda could have a harder time selling their EVs and reaching their sales targets in markets where such subsidies are critical for affordability.
Securing a robust Supply chain from raw materials like lithium and cobalt might also pose a problem for this joint company. For example, disruptions in mining operations in countries like the Democratic Republic of Congo, a major cobalt producer, can lead to supply shortages and increased prices. These issues are important points the joint companies could consider moving forward.
Mitsubishi Motors has plans to join the merger.
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Danny Emakess
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