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The potential “handshake” between Honda and Nissan, with the possible addition of Mitsubishi, is seen as a significant turning point that could reshape Japan’s automotive industry. However, it won’t be easy for Nissan to join forces with Honda, the second-largest automotive brand in the Land of the Rising Sun.
According to Carscoops, Nissan is under immense pressure to boost its sales and profitability to facilitate a merger with Honda. If Nissan fails to show any financial improvement, the merger plans may fall apart.
At a joint press conference in late 2024, the automakers presented their goals to be accomplished by August 2026 – the deciding period for the merger. Specifically, to attain the financial target necessary for joining Honda, Nissan must bring in 2.6 billion USD in 2026.
This poses an enormous challenge for the automaker, especially given Nissan’s declining sales and revenue. With a deeper net income drop of 93.5% to 131 million USD in the first half of 2024, and a year-end profit reduction of 74% to 950 million USD, equivalent to a 0.5% profit margin, Nissan is facing an uphill battle.
As per Nikkei Asia, the newly merged entity is expected to attain 19 billion in annual profits post-merger. This translates to Nissan needing to contribute approximately 3.8 billion USD in profits annually. Should Nissan fail to devise a sound strategy to reach this level of profitability, the dream of merging with Honda will likely shatter.
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The Honda-Nissan merger may not come to fruition. Image: Nikkei. |
“The integration will not be feasible unless Nissan and Honda demonstrate comparable operational efficiency. Both companies need to stand firmly on their own feet before joining hands,” stated Honda’s Chairman, Mr. Toshihiro Mibe.
Honda’s expectations are understandable, given its superior market performance compared to its potential partner. With Honda concluding 2024 with approximately 9.1 billion USD in profits, it’s clear why they seek financial stability in a merger. Numerous merger-related clauses are still under discussion.
By June, Nissan and Honda are expected to finalize the share transfer ratio. However, local media suggests that Nissan could become a “burden” for Honda should this merger materialize.
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