Failed Merger of Japan's Honda and Nissan... Will a New Survival Strategy Emerge?

Honda and Nissan See Sales Decline Amid Rise of Electric Vehicles
"New Strategies Needed After Merger Talks Collapse"

The merger between Japan's Honda and Nissan Motor, which aimed to become the world's top automobile company, has fallen through. Analysts say that both companies need to find new survival strategies amid industry changes brought by the emergence of electric vehicle manufacturers such as the U.S. Tesla and China's BYD.

Nissan Motor and Honda logos. Photo by Reuters and Yonhap News

On the 13th, Honda and Nissan each held board meetings and decided to suspend discussions on management integration that had been ongoing since December last year.

Previously, the two companies discussed merging by establishing a holding company in August next year, with both becoming subsidiaries of the holding company. Honda pressured Nissan, which has been experiencing poor management performance, to push for restructuring, but Nissan did not respond positively.

In this situation, Honda proposed acquiring all of Nissan's shares to make it a wholly owned subsidiary in order to secure management control of Nissan. In response, Nissan expressed dissatisfaction, saying that Honda "does not respect the other party," and the merger talks fell apart. Kyodo News analyzed, "The discussions did not deepen because a trust relationship was not established," adding, "A dark cloud has been cast over the competitiveness of both companies, and their management stands at a crossroads."

With the collapse of this merger, there are forecasts that the sluggish performance of both companies will continue. Kyodo News reported, "Nissan's difficult situation due to poor sales is expected to persist for the time being, but Honda, whose challenge is the profit margin of its four-wheel vehicle business, also needs revitalization measures," and added, "Many experts say it will not be easy for either company to go it alone." Sankei Shimbun also analyzed, "Both Honda and Nissan are under pressure to strengthen their profit bases to survive the next-generation automobile competition, and a new era of alliances and mergers is about to begin."

In particular, the emergence of electric vehicles such as BYD has led to a decline in sales for both companies. Honda and Nissan's global sales last year were 3,807,000 and 3,348,000 units respectively, down from the previous year (3,980,000 and 3,370,000 units).

Some argue that the management direction of the two companies could be determined by the moves of Foxconn, which is reportedly interested in Nissan's management. Foxconn Chairman Liu Yangwei recently met with Renault, Nissan's largest shareholder. Sankei predicted, "If Honda maintains interest in collaborating with Nissan, there is a possibility of a new framework emerging where Foxconn and Honda engage in a tug-of-war over Renault's stock acquisition or Foxconn brings Honda in to link with Nissan."