Honda and Nissan have started discussions to merge their companies and become the third-largest car maker in the world.
Nissan and Honda, two car companies from Japan, said on Monday that they are starting talks to combine and make one big car company. This new company would be the third-largest in the world based on sales.
At a news conference on Monday, Honda CEO Toshihiro Mibe said that companies need to be bigger to keep up with making new technologies for electric cars and smart driving. Mibe said that joining the businesses would give them an advantage that they can’t achieve with their current way of working together.
The agreement would focus on sharing information and resources to save money and work better together, while keeping both brands safe, he said.
A holding company will be created as the main company for both Honda and Nissan, and it will be listed on the Tokyo Stock Exchange. The bigger Honda will choose most of the board members for the combined company. The combined group could make 30 trillion yen ($191. 4 billion) in sales and more than 3 trillion yen in operating profit, he said.
Honda made 1. 382 trillion yen in operating profit for the year ending in March 2024, while Nissan had 568. 7 The two companies would be worth almost $54 billion together, with Honda being the larger part at over $43 billion.
Discussions are expected to finish in June 2025.
Mibe said that if it gets the green light, the integration will be a project that takes time, and we probably won’t see noticeable results until 2030 or later.
Nissan’s partner, Mitsubishi, has been given the opportunity to join the new group and will make a decision by the end of January 2025.
The companies are struggling with strong competition in the electric vehicle market from Tesla and China’s BYD. The expensive shift to electric vehicles for old companies has been expected to lead to mergers and buyouts in the industry.
Japan’s Toyota is the biggest car company in the world by sales is Toyota, and the second biggest is Volkswagen from Germany.
If Nissan and Honda team up, they would become bigger than South Korea’s Hyundai.
Nissan is having a tough time.
The suggested agreement was first mentioned by Japan’s Nikkei newspaper on December. Sure However, it seems like there’s no text provided. Please share the text you’d like me to simplify, and I’ll be happy to help.
Nissan’s stock prices went up sharply after news of a merger came out. Experts say the possible partnership is happening because the company is not doing well financially and is changing its long-time relationship with France’s Renault.
In its latest report, Nissan announced that it will cut 9,000 jobs and lower its global production by 20%.
On Monday, Honda’s CEO Mibe said that some of the company’s shareholders might think that the deal means Honda is backing Nissan.
However, he pointed out that the merger depends on Nissan successfully improving its situation.
“If Nissan and Honda can’t manage by themselves, the talks about joining their businesses won’t succeed,” he said.
Nissan CEO Makoto Uchida told reporters that talking about joining forces doesn’t mean they have stopped trying to improve the company.
Instead, it’s about making sure Nissan stays strong and competitive in the future.
“After making changes for future progress and growth, we need to consider how big we want to be and how quickly we want to grow. ” “This growth will happen through teamwork,” he said.
Nissan has been having a hard time in the market. It is facing difficulties in its home country and doesn’t have the right products to sell, according to Peter Wells, a professor at Cardiff Business School. He shared this during an interview on CNBC’s “Street Signs Europe” last week.
“There are many warning signs about Nissan right now, so something was bound to happen. ” “Whether this is the answer is a different question,” Wells said.
Renault’s shares went up by 1.2% The company owns 17% of Nissan and has another 18.7% through a French trust. At the same time, Nissan is an important investor in Renault’s electric vehicle and software division called Ampere.
In Asian trading, Nissan’s stock went up by 1.2% before the announcement. Honda’s stock rose by 3.8%, and Mitsubishi’s stock increased by 0.6%
