For every traditional automaker, the rise of formidable Chinese competitors such as BYD, particularly in the EV sector, is a significant challenge.
In a significant development within the automotive industry, it was revealed in December that Japanese automakers Honda and Nissan had entered into discussions to merge their operations, aiming to establish the world’s third-largest car manufacturer by sales. Mitsubishi Motors, in which Nissan holds a 24 per cent stake, was reported to be considering joining the merger plan.
Talk of such a tie-up likely stemmed from several factors, not least of which is a global automotive landscape undergoing a rapid transformation with a pronounced shift towards electric vehicles (EVs) and advanced autonomous driving technologies. For every traditional automaker, the rise of formidable Chinese competitors such as BYD, particularly in the EV sector, is a significant challenge.
The sight of two – potentially three – of the great names of the Japanese automotive industry joining forces was clearly momentous news. The potential merger was seen as a way to pool resources, cut costs, and accelerate the development of next-generation vehicles. If successful, the new entity would have rivaled Toyota and Volkswagen in terms of global scale, giving Japan another automotive powerhouse capable of competing with emerging industry giants.
However, just a few weeks after the announcement of the potential merger, the wheels look to have fallen off, with one sticking point seemingly over control. According to reporting from Reuters, Honda suggested that Nissan become a subsidiary – a suggestion met with resistance from Nissan’s leadership who subsequently stepped back from talks.
With the Honda merger apparently on the rocks, Nissan has begun looking at other strategic partnerships, including with non-traditional players. Reports suggest some sort of strategic tie-up rather than merger could be possible with Taiwanese technology behemoth Foxconn. Such a partnership could open up a potential new path for Nissan, one that would allow it to secure technological advancements without having to merge.
Nissan may need to do something. The company is reportedly in some trouble. At the end of 2024 it announced it was facing a ‘severe situation’, was to take ‘urgent measures to turnaround its performance . . . ‘ and that it would cut global production capacity by 20 per cent and reduce its global workforce by 9000.
At the time of writing, the fate of the Honda-Nissan-Mitsubishi merger remains uncertain, but the likelihood of it proceeding as originally envisioned appears slim. With Nissan stepping back from negotiations and exploring alternatives, the most probable outcome is a continued separation of these companies, each pursuing its own strategy for the future of mobility.
For Honda, this working on its EV development efforts and seeking other collaborations. For Mitsubishi, it remains tied to the Renault-Nissan-Mitsubishi Alliance but could seek additional partnerships. Nissan, meanwhile, may find its future intertwined with tech-driven companies like Foxconn, signaling a new era where traditional automakers align with electronics and software giants rather than merging with their historic rivals.
Regardless of how this plays out, one thing is clear: the global automotive industry is at a crossroads, and Japanese automakers – actually, all automakers – must move quickly and strategically to remain relevant in an increasingly digital and electrified world.
Source: Motor Trader e-Magazine (February 2025)
23 March 2025