A potential seismic event is underway in the automotive world.
Nissan (NSANY) and Honda (HMC) are in talks to merge, as first reported by Japan’s Nikkei news agency. Bloomberg reports the two Japanese giants pushed their merger talks forward as Taiwan’s Foxconn, the maker of devices like the iPhone and others, approached Nissan about a stake. And just this morning Japan’s Yomiuri news outlet reports a memorandum of understanding with regards to a merger could be signed as early as December 23rd.
Nissan, struggling with sales both here in the US and globally, would be receiving a lifeline in the form of Honda with potential access to capital, and shared development costs. Honda would gain more manufacturing capacity and benefit from cost sharing as well. The companies are already partnering on developing next-gen EV platforms, where Nissan has an advantage with its many years selling the Leaf EV, and current Ariya EV crossover.
Nissan shares, both traded overseas and in OTC markets in the US, soared after the news broke.
“The announced merger talks between Nissan and Honda are not surprising, given the recent turbulence impacting legacy automakers globally,” said Michael Brisson, auto economist at Moody’s Analytics.
A potential merger between Nissan and Honda would create the world’s third largest automaker, right behind Toyota and Volkswagen, and leapfrogging Korea’s Hyundai-Kia group in total unit sales.
Nissan’s struggles have been an issue all year. The company reported global revenues fell 5% in its most recent quarter (fiscal Q2 – July to September) and a net loss of $62 million versus a profit a year ago. Operating margins droped below 0.2%.
The company also cut its revenue projection for the 2025 fiscal year by 10%, with the company saying that it is “facing a severe situation” and that it is “taking urgent measures to turn around its performance and create a leaner, more resilient business capable of swiftly adapting to changes in the market.” Nissan said it would cut its global capacity by 20% and reduce its global workforce by 9,000.
Honda’s earnings, meanwhile, were mixed in its fiscal Q2, with revenue topping estimates but earnings missing the mark.
While Nissan’s US sales are struggling, with sales down 2.2% in Q3, while Honda’s sales surged, up 8% in Q3 and up 13.4% year to date. Part of that success is due to Honda’s hybrid offerings, which are popular in the US, and the company said it intends to make more hybrids in the future – doubling hybrid sales by 2030.
Meanwhile Nissan decided to push more into EVs with the Ariya EV and ended hybrid production, which is looking like a mistake. While Ariya sales are higher year over year, the company has had to discount these models heavily, eating into margins.