Car giants confirm mega merger talks

Two of the world’s largest vehicle makers, with dealerships across Australia, have confirmed they could merge as China’s EV boom bites.

Two of the world’s biggest car manufacturers – well known to Aussie motorists – have said they are exploring merger talks which could drastically change the vehicle market.

It’s a further example of the radical restructuring of the automotive industry in the wake of electric vehicles and competition from Chinese brands.

Honda and Nissan, both of Japan, have confirmed they are exploring a deal to bring the firms together.

Japanese newspaper Nikkei said a memorandum of understanding between the two was expected to be signed as early as next week.

“Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other’s strengths,” the companies said in a statement on Tuesday.

“If there are any updates, we will inform our stakeholders at the appropriate time.”

It’s been reported that rival Japanese car firm Mitsubishi could also be part of any future merger. Nissan owns 24 per cent of Mitsubishi.

A three-way tie up could create the world’s third largest car maker with only Japanese rival Toyota and German behemoth Volkswagen bigger.

Nissan has 4 per cent of the Australian car market and Honda 6 per cent.

(FILES) The emblem of Japanese automaker Nissan Motor is seen at a showroom in Yokohama on May 9, 2024. (Photo by Yuichi YAMAZAKI / AFP)

Nissan and Honda have storied histories but have been t by challenges in recent years.

In its most recent financial results, Nissan stated its profit margin had plummeted from 5.6 per cent to just 0.5 per cent over the year while it cut its annual profit margin by 70 per cent.

The maker of the Qashqai, Navara and Leaf models was rocked last month when French car giant Renault said it would sell its controlling stake after 25 year of partnership.

That led Nissan, founded in 1911, scrambling to find a new backer.

“We have 12 or 14 months to survive,” a senior official close to Nissan said.

CR-V, Civic and Accord maker Honda is going through a turbulent time too, albeit slightly less rocky. Last month it announced it expected full year profits it be around 14 per cent lower than last year.

With a market capitalisation of $68 billion, Honda would be the major partner in any merger with Nissan which is worth $15bn.

A Honda logo outside a dealership in Tokyo. (Photo by Philip FONG / AFP)

China and US woes

Like most western vehicle makers, Nissan and Honda have been heavily invested in the Chinese market.

However, the rise of electric vehicles has stymied growth. While booth brands produce EVs, in China home grown manufacturers have grabbed more of the market from foreign brands.

In China, brands like BYD and Great Wall are seen as more economical and technologically advanced. Where once Chinese motorists may have shunned Chinese brands now they are being embraced.

In the US, and many other overseas markets, Tesla has been outperforming more established vehicle makers EVs.

The 2023 Nissan X-Trail ST-L e-power.

‘Left it a bit late’

Talking to US network MSNBC, Peter Wells from the UK’s Cardiff University Centre for Automotive Industry Research said the joining of Honda and Nissan would create economies of scale.

“Nissan has been struggling in the market, it’s been struggling at home, it doesn’t have the right product line-up.

“There are so many warning signs, so many red flags around Nissan at the moment that something had to happen,” he said.

“Whether this is the answer is another question.”

But Prof Wells warned “they may have left it a bit late,” and that neither firm has the most current industry tech or products to compete effectively.

Chinese car manufacturer BYD is on display at the Essen Motor Show in Essen, western Germany on December 4, 2024. (Photo by Ina FASSBENDER / AFP)

The merger talks conformation sent Nissan shares surging by 24 per cent ion Wednesday, US time.

Nissan was already close to finalising terms on an electric vehicle partnership with rival Honda. So a more formal merger would not be unexpected.

Nissan has been criticised for falling behind on hybrid technology, with rivals such as Toyota, Hyundai and Kia having capitalised on the boom in petrol-electric models.

Nissan does offer its own take on the hybrid theme with its e-Power models, which use a petrol engine only as a generator for an electric motor and battery pack. That tech is available in high-grade versions of the Qashqai small SUV and X-Trail family SUV in Australia.

– with Matt Campbell and David Campbell.

Originally published as Car giants confirm mega merger talks