Taking A Second Look At The Honda/Nissan Merger

janeiro 2, 2025

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Usually, when two companies merge, there are multiple press releases replete with the words “synergy” and “economies of scale” thrown about like confetti at a wedding. When Toshihiro Mibe, the CEO of Honda, was asked recently what the strategic benefits of the new partnership were, Mibe-san replied, “That’s a difficult one.” He is not alone in finding it hard to explain. According to Autoblog, the merger has been met with skepticism from analysts and confusion among industry insiders. While it could create a global automotive giant producing 7.4 million vehicles annually, critics are questioning whether this union is a savvy strategic move or a desperate gamble.

For one thing, it does not seem to be a merger of equals. Honda enjoys steady sales thanks to its strong hybrid lineup and loyal customer base. However, it has not been able to make a significant impact in the EV market, although it has a sales winner on its hands with the battery electric Prologue, which is based on the General Motors Ultium platform. So are the Blazer EV and Equinox EV, but the Prologue is outselling both of them.

As we speculated recently, the Prologue is a Honda first and an electric car second. People who have owned Hondas previously get in and immediately feel comfortable behind-the-wheel. Those who first experience a Tesla with its “computer on wheels ” look need time to get acclimated to a whole new behind the wheel experience.

But Honda has parted company with General Motors. Although the Prologue is still being assembled at the GM factory in Spring Hill, Tennessee — and one Acura model as well — there will be no other Honda electric cars built there. Some industry observers believe that Nissan’s experience with building electric cars may help Honda learn how to do so as well.

How Does Nissan Help Honda?

Nissan is having significant problems of its own. Sales are down substantially worldwide and particularly in the US. Autoblog says the Nissan dealer network is faltering and its EV lineup is stagnant. The LEAF was once a groundbreaking electric car that was a gateway to the EV revolution for many, but it now feels dated compared to other EVs on the market, especially those from Hyundai and Kia, while the Ariya battery electric SUV is languishing on dealer lots.

Analysts think the merger is more about politics than economics. They speculate that Honda may be stepping in as Nissan’s white knight to prevent a potential hostile takeover by Taiwan’s Foxconn, which is famous for manufacturing the Apple iPhone. It has reportedly put its plans to bid for Nissan on hold until the merger talks between Honda and Nissan are concluded. While Foxconn hasn’t entirely ruled out a future bid, the company seems content to let the two Japanese automakers determine their path forward before making its next move.

Foxconn definitely is interested in getting into the auto manufacturing business. It now owns the former Lordstown Motors factory and has made noises about manufacturing vehicles for Fisker, Scout Motors, Tesla, and Saudi Arabia. Having it acquire Nissan would be a major blow to Japanese pride, but it could happen if the Honda/Nissan talks fail.

The Politics Of The Deal

Despite Honda’s insistence that the merger is “not a rescue,” many see it as an attempt to prevent further destabilization of Nissan and protect Japan’s automotive industry from foreign control. That may be why Mitsubishi is being included in the deal as well. There is rampant speculation that Japan’s Ministry of Economy, Trade, and Industry (METI) played a significant role in encouraging the merger. By endorsing the partnership, METI could be seeking to ensure that Nissan remains under Japanese control, thwarting Foxconn’s interest in acquiring the struggling automaker.

What METI wants, METI gets. Most suspect the fascination in the Japanese car industry for hydrogen fuel cell powered cars like the Toyota Mirai and Honda Clarity was prompted by the government for political reasons, not any burning desire to bring hydrogen powered transportation to the world.

In theory, the Honda/Nissan merger could have some advantages. Honda’s expertise in hybrid technology could help modernize Nissan’s aging lineup, while Nissan’s established EV infrastructure might give Honda the boost it needs to compete in the growing electric market. Additionally, Nissan’s extensive manufacturing network and presence in Southeast Asia could complement Honda’s global operations. However, the overlap between the two companies is substantial and it’s unclear whether their combined efforts will create a stronger entity.

The Benefits May Be Years Away

If the merger proceeds, it won’t be a quick fix. Analysts at AlixPartners estimate it could take three to five years for the companies to see any meaningful results. In the meantime, rivals like Toyota, Volkswagen, and emerging Chinese automakers are likely to widen the competitive gap. Carlos Ghosn, the former CEO of Nissan, has been vocal in his criticism of the merger. “That means you’re putting control above performance,” said Ghosn. “Personally, I don’t think it’s going to be successful.”

Since news of the potential merger surfaced, the share prices of Nissan’s and Honda’s stocks have fluctuated significantly. After soaring more than 60% on news of the deal, Nissan’s stock has tumbled in recent days, driven by concern that investors would hold a lower stake in the proposed joint holding company. Honda, meanwhile, saw its stock price jump about 17% in recent days after the automaker announced plans to buy back roughly $7 billion worth of shares by next December. Honda’s announcement helped alleviate earlier concerns from investors who worried that the merger with Nissan would negatively impact the company’s value.

All this merger talk raises more questions than it answers. Why would Honda align itself with a company on the brink of financial ruin? Is this a calculated move to protect domestic interests, or a desperate gamble to stay relevant in an increasingly competitive market? Many CleanTechnica readers have suggested over the years that the EV revolution would lead to realignments in the auto industry. If even the CEO of Honda can’t identify the reason why merging with Nissan is a good business decision, it’s little wonder that others are wondering too.