Nissan and Honda Motor, Auto Manufacturers from Japan, announced on Monday (December 23) that they have entered formal negotiations regarding a merger;
The merged entity is expected to achieve annual revenue of 30 trillion yen and an operating profit of over 3 trillion yen, potentially becoming the third largest Auto Manufacturer in Global sales;
The CEO of Honda stated that the aim of this merger is to share information and resources, bringing advantages that are not possible under the current cooperation framework.
According to reports on December 23 (Editor: Zhou Ziyi), Auto Manufacturers from Japan $Nissan Motor (7201.JP)$ and $Honda Motor (HMC.US)$ officially announced on Monday (December 23) afternoon that both parties have entered formal negotiations regarding the merger. The merger is expected to create a Global third largest Auto Manufacturer.
Currently, both companies are 'gritting their teeth' to cope with fierce competition in the global electric vehicle market, with major competitors including Tesla, BYD, and others.
Local Japanese media first reported on this proposed Trade last week, and after the related reports were published, Nissan's stock price soared. Following the announcement on Monday afternoon to start formal merger negotiations, Honda Motor's Pre-Market Trading rose nearly 18%.
The merger may bring greater advantages.
At Monday's press conference, Honda's CEO Mibe Toshihiro stated that the deal aims to allow both parties to share intelligence and resources to achieve economies of scale and synergies, while protecting the two brands. The business integration will bring advantages that are impossible to achieve under the current cooperation framework for both companies.
Mibe also pointed out that both companies need to put more effort into the development of new technologies for electric vehicles and Asia Vets.
Reportedly, Honda and Nissan aim to complete the integration negotiations by June 2025. If this transaction is approved, it is expected that Honda and Nissan will establish a holding company that will serve as the parent company for Honda and Nissan, listed on the Tokyo Stock Exchange. The larger Honda will have the right to nominate most of the Board of Directors members for the merged entity.
Mibe also added that the integration of the two companies' Businesses will be a medium to long-term project, with significant progress expected only after 2030.
In addition, Nissan's strategic partner Mitsubishi has gained the opportunity to join the new group, and the company will make a decision by the end of January 2025.
Pulling out of the performance trough.
The cooperation ideas between both sides had begun to take shape as early as March this year. At that time, both sides stated that they were considering collaborating in the areas of electrification and Software Development, and later in August, they mentioned considering expanding their collaboration to include Mitsubishi Autos.
The promotion of this potential collaboration may also be due to Nissan's poor financial performance and the restructuring of its long-term partnership with French Renault.
Last month, in its recent quarterly results, Nissan announced it would lay off 9,000 employees and cut global production capacity by one-fifth. Its performance was shocking, with Nissan's Net income in the first half of 2024 being only 19.2 billion yen, a 94% year-on-year decline.
Industry expert Peter Wells pointed out last week, "This Auto Manufacturer has been struggling in the market and has also been struggling in Japan; it does not have a suitable product lineup."
Wells also stated, "Currently, there are too many warning signals surrounding Nissan, too many danger signals; action must be taken. As for whether the merger is the right answer, that is another question."
Nissan CEO Makoto Uchida stated on Monday that discussions on integration "do not mean we have given up on turning the situation around, but rather to ensure the company's future competitiveness."
He also mentioned, "After adopting this turnaround approach for future development and growth, we need to consider the eventual scale and growth, which may be achieved through partnerships."
Honda CEO Toshihiro Mibe stated, "If neither Nissan nor Honda can be self-sufficient, negotiations for business integration will not yield results."
Regarding revenue expectations for the merged entity, Mibe added that the combined entity is expected to achieve annual revenue of 30 trillion yen (191.4 billion USD) and an operating profit exceeding 3 trillion yen.
Editor/Jeffy