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According to Nikkei, Japanese automakers Nissan and Honda have initiated discussions towards a potential merger. Details of the negotiations remain undisclosed. In the context of Nissan’s challenging situation, what does this partnership mean for the company’s future?
Will Nissan Disappear?
Nissan has been grappling with prolonged challenges, falling short of sales expectations. Last month, the company reported a 90% drop in profits and a 94% decline in net revenue for the first half of the fiscal year. In 2023, Nissan’s US sales stood at 834,097 units, a decrease of nearly 300,000 units compared to a decade ago.
In an interview with the Financial Times, Nissan representatives stated that without new strategies, the company had only 12-14 months of operations left. The difficulties faced by Nissan’s management were anticipated, and rumors of a potential partnership with Honda have been circulating for almost half a year.
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In late 2023, Carlos Ghosn, former CEO of Nissan, hinted at Honda’s potential acquisition of Nissan when they announced their joint venture for electric vehicle production. In March, Nissan and Honda signed an agreement to collaborate and share technology in the electric vehicle sector. During the third quarter, Honda gradually acquired Nissan’s shares from Renault, leading to speculations among Japanese media about Honda’s intentions to take over its compatriot.
Despite their respective challenges, it is highly unlikely that either brand will disappear as a result of this merger. Honda is the second-largest automaker in Japan, closely followed by Nissan.
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Nissan Kicks. Photo: Nissan. |
In 2023, Honda sold over 4.1 million vehicles globally, while Nissan sold more than 3.44 million vehicles worldwide post-2023. With their massive sales figures and brand value, eliminating either of these established brands is improbable.
A Collaborative Future
Rather than a merger, Nissan and Honda’s negotiations may lead to the formation of a parent company, allowing them to share resources in production and business operations. This strategy would reduce costs and increase profits for both entities. On December 17, representatives from both companies indirectly confirmed this collaborative direction.
“As announced in March, Honda and Nissan are exploring future collaboration possibilities, leveraging each other’s strengths in manufacturing,” stated the Honda and Nissan spokespeople.
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Nissan and Honda will form a partnership for mutual growth. Photo: Reuters. |
By establishing a parent company, Nissan and Honda can share chassis systems and battery technology for new products. In March, they signed an agreement to form a strategic partnership in electric vehicles and other areas. This collaboration will enable them to compete more effectively on pricing with Chinese automakers and Tesla.
Additionally, significant cost savings in product development can make Honda and Nissan vehicles more affordable, attracting new customers. Increased sales, higher profits, and reduced production costs are the primary benefits of this partnership for both Nissan and Honda.
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