Honda and Nissan in Merger Talks

(Reuters) – Honda (NYSE:HMC) and Nissan (OTC:NSANY) are discussing a deepening of their ties, potentially leading to a merger. This indicates the dramatic shift in Japan’s auto industry due to competition from Tesla (NASDAQ:TSLA) and Chinese automakers.

Expert Opinions

Sanshiro Fukao, Executive Fellow, Itochu Research Institute, Tokyo

"This deal seems more about rescuing Nissan, while Honda is also facing challenges. Honda's cash flow may decline next year, and its EV efforts have not been successful. Major changes are needed, possibly involving a spin-off of its motorcycle division and strengthening its financial foundation in engine cars. If a holding company with Nissan facilitates this, it would benefit Honda. However, if they think merely joining forces will suffice, their survival is questionable, especially with the aggressive pace set by Chinese competitors. The traditional strategy of mergers leading to profits for reinvestment in restructuring is outdated."

Tang Jin, Senior Principal Researcher, Mizuho Bank, Tokyo

"Honda’s unique tech-centric culture and strengths in powertrains may create resistance to merging with Nissan, which has a diverging culture and is currently struggling. Honda lacks significant management resources and must find a way to profit from hybrids and motorcycles while shifting to electrification quickly. Conversely, Nissan is at a crossroads for survival. The auto industry is evolving rapidly, and both companies must make quick, synchronized decisions to remain relevant."

Seiji Sugiura, Senior Analyst, Tokai Tokyo Intelligence Laboratory, Tokyo

"Internal views at Honda regarding the merger are likely divided. The motorcycle division is thriving, while the four-wheeler segment has issues but is not in a crisis. Long-term, this merger could benefit the Japanese auto industry by creating a competitive alternative to Toyota (NYSE:TM), fostering healthy rivalry that is essential in the face of strong competition from Tesla and Chinese manufacturers."