Talk for Integration between Honda and Nissan

Two major carmakers in Japan, Honda and Nissan, start talks for integrated management including possible merger. Growing international competition among carmakers over developing new technology and unexpected slump of Nissan accelerated their discussion for further cooperation each other. The automobile industry in Japan, which is the major driver of Japanese economy, is likely to be reformed into two groups, led by Toyota and Honda-Nissan.

Car manufacturers are said to be in the period of major technological transition once in a century. The main elements of a car, gasoline, engine and driver, are getting replaced by electricity, software and automatic cruising system. Japanese carmakers are struggling with this technological revolution, even though they are still occupying the major share in car sales in the world.

Honda and Nissan have been talking about their cooperation to deal with this transitional period. They agreed on promoting comprehensive partnership in developing electric cars in March. They also shared a vision in August for providing with software defined vehicles, which is supposed to occupy a major share in car sales. Their concern has been how to manage the challenges from foreign powers in electric vehicles, such as Tesla in the United States or BYD in China.

One thing that accelerated the discussion of those two major car makers was the abrupt slowdown of Nissan. Nissan released its interim financial result of September 2024, which marked ninety percent decline in profit from the same period of previous year, with its plan of cutting 9,000 employees, worth a tenth of all. They realized that a growing technology provider in Taiwan, Hon Hai Technology Group, was considering acquisition of shares of Nissan possessed by Renault, former French business partner of Nissan. Honda decided to make the discussion with Nissan faster.

It is expected that Honda and Nissan are going to build a holding company. As Honda is ranked at the seventh position in the world selling 3.98 million cars in 2023 and Nissan at the eighth with 3.37 million, their integration will produce the third biggest car maker, surpassing Hyundai-Kia group in South Korea. They are going to include Mitsubishi Motors in their group to reinforce their technological cooperation.

The integration, however, is going to impose a major impact on Japanese economy. It is possible that they are going to restructure their satellite companies to enhance efficiency of management. Different kinds of culture held by Honda and Nissan is another concern of their integration. Nissan has been seeking helping hands from outside, as seen in cooperation with Renault, while Honda kept its independence. Some skepticisms on their philosophical differences remain.