Japan's Honda and Nissan to begin merger talks, Nikkei reports

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(Reuters) – Japanese auto giants Honda Motor and Nissan Motor will begin negotiations to merge as they face rising competitors from larger world electrical car makers, the Nikkei newspaper reported on Tuesday.

The carmakers have elevated ties in latest months as they wrestle with the altering EV panorama. Heavy competitors from Tesla and native rivals in China, a nation quickly adopting EVs, and stalling demand in Europe and the U.S. have intensified the strain conventional automakers face.

Honda and Nissan on Tuesday issued similar statements saying no merger had been introduced by both firm. Reuters has not independently verified the report.

“As introduced in March of this yr, Honda and Nissan are exploring numerous prospects for future collaboration, leveraging one another’s strengths,” the businesses stated in separate statements, including they’ll inform stakeholders of any updates at an applicable time.

As well as, French automaker Renault, a serious Nissan shareholder, stated it has no info on the matter and declined to remark.

Over the previous yr, an EV value battle launched by Tesla and Chinese language automaker BYD has solely intensified strain on any corporations dropping cash on the next-generation autos. That has put strain on corporations like Honda and Nissan to hunt methods to chop prices and velocity car growth, and mergers are a serious step in that course.

Honda’s market capitalization is 5.95 trillion yen ($38.8 billion), whereas Nissan’s is 1.17 trillion yen ($7.6 billion). Any deal could be the largest within the business for the reason that $52 billion merger between Fiat Chrysler and PSA in 2021 to create Stellantis.

Honda’s U.S.-listed shares had been up 1.3% in afternoon buying and selling.

Nissan and Honda, Japan’s third- and second-biggest automakers, respectively, after Toyota, have been dropping market share in China. That nation accounted for nearly 70% of world EV gross sales in November, with greater than 1.27 million in purchases for the month.

The 2 had mixed world gross sales of seven.4 million autos in 2023, however are grappling with challenges from EV makers, significantly in China, the place BYD and others have surged forward.

International automakers Basic Motors and Ford have slowed investments in EVs as excessive borrowing prices and poor charging infrastructure hinder their adoption regardless of authorities incentives. In September, GM stated it was in talks with South Korea’s Hyundai Motor to discover methods to collaborate in a transfer to chop prices, together with on joint car growth.

Europe’s automotive sector is in turmoil, with 1000’s of jobs on the road as automakers endure from a weakening market, excessive prices, a slower-than-expected takeup of EVs and rising competitors from Chinese language rivals.

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Volkswagen has threatened to shut crops in Germany for the primary time in its 87-year historical past, lower jobs and slash wages to scale back prices and enhance revenue. Final week, Europe’s prime carmaker stated it’ll shut its Audi plant in Brussels subsequent yr.

In Europe, Volkswagen is locked in acrimonious talks with its union over price cuts because it struggles with falling demand and rising prices.

The worldwide auto business can also be bracing for a possible rollback of EV-friendly insurance policies by U.S. President-elect Donald Trump, Reuters has reported.

Any merger would face vital U.S. scrutiny and Trump has vowed to take a tough line on imported autos – together with threatening 25% tariffs on autos shipped from Canada and Mexico – and he might search concessions from Honda and Nissan to approve any deal, auto business officers stated. Throughout his first time period, Trump threatened tariffs on Japanese autos.

Honda and Nissan in March agreed to cooperate of their EV companies, and in August deepened their ties, agreeing to work collectively on batteries, e-axles and different know-how.

The automakers want to function underneath a single holding firm and are anticipated to signal a memorandum of understanding quickly for the brand new merged entity, the Nikkei reported.

Honda and Nissan are additionally wanting to herald Mitsubishi Motors, during which Nissan is the highest shareholder with a 24% stake, underneath the holding firm, to create one of many world’s largest auto teams, the report stated.

Mitsubishi officers didn’t have a direct remark.

The stakes of Honda and Nissan within the new entity, together with different particulars are to be determined later, Nikkei stated.

Nissan has been reeling from weak demand in China and the U.S., prompting the Japanese automaker to take cost-saving measures akin to company rejigs.

Final month, the corporate stated its half-year web earnings had been down greater than 90% from a yr in the past and lower its annual working revenue forecast by about 70%.

Nissan had been on the forefront of EVs within the 2010s with the Leaf mannequin, however has been overtaken this decade by newcomers and pure gamers.

($1 = 153.2800 yen)

(Reporting by Shivangi Lahiri, Abhijith G and Nathan Gomes in Bengaluru, Norihiko Shirouzu in Austin, Texas; Gilles Guillaime in Paris, and David Shepardson in Washington; Modifying by Arun Koyyur, Ben Klayman and Matthew Lewis)

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