Under the impact of the wave of electrification and intelligence in the global automobile industry, Japan's two leading car companies, Honda and Nissan, finally chose to "hold together for warmth."On December 23, 2024, Honda and Nissan jointly announced in Tokyo that they had signed a memorandum of understanding on merger matters and officially started merger negotiations.At the joint press conference, the two parties will merge to become a "world-class mobility company with annual sales exceeding 30 trillion yen (approximately RMB 1.39 trillion) and annual operating profit exceeding 3 trillion yen (approximately RMB 139 billion)."
On the surface, through this merger, Japan may be forced to create a super-large group with annual sales of 8 million vehicles. Since then, Toyota, the leader, and Honda, Nissan, the third leader, have not only locked the upward path of new energy vehicle companies such as Tesla and BYD, but they have also been able to attack Volkswagen from both front and back.
But a more reasonable argument is that it may be difficult for a temporarily formed army to become an elite force.
Former Nissan CEO Carlos Ghosn said:"The merger of Nissan and Honda is a desperate move. It is not a pragmatic deal, and it is difficult to find synergies between the two companies. There is almost no complementary relationship between the two companies. They are in the same market, produce the same products, and have very similar brands."
Ghosn also said: "Honda is an engineering organization and very strong on the engineering side. Nissan is very proud of its engineering. So the struggle here is trying to decide what technologies the new company or the new alliance will adopt."
Therefore, mergers have begun, but the question is whether the world's third largest automobile group can use this opportunity to better respond to the rapidly changing global automobile industry. It is actually difficult to say.
A "weak" alliance
"Nihon Keizai Shimbun" commented on this major merger: This is to cope with competition from car companies such as Tesla and China's BYD.
This also reveals the direct reason for the merger of the two companies - global car companies will face challenges in 2024: price wars, profit decline, store closures, layoffs, salary cuts... Under the haze, Honda and Nissan are facing fierce competition from Chinese car companies and Tesla in the field of electrification.
Nissan, in particular, can no longer survive.
In recent years, due to its excessive reliance on the Chinese market and too single product line, Nissan has not only faced an offensive from local Chinese new energy vehicle companies, but has also struggled with sales in the United States. In addition, the preferential squeeze from the price war in China has also limited its profit margins.
The results are directly reflected in overall sales.
This car company, which has sold more than 1 million vehicles in China for many years, has seen its sales in China plummet to 798,000 vehicles in 2023, and its cumulative sales in the first 11 months of 2024 have dropped to 622,000 vehicles.
According to financial report data released by Nissan, global sales in the first three quarters of 2024 were 2.5058 million vehicles, and net profit plummeted 99%. In the third quarter of 2024 alone, Nissan is deep in losses, with a loss of 9.3 billion yen (approximately US$82 million).
Even more worryingly, Nissan reportedly has only 12 to 14 months of cash reserves left.The company also faces pressure from activist shareholders and a massive debt load that has led credit markets to question its investment-grade rating.
In order to cope with this dangerous situation, Nissan officially announced in December last year that it would conduct a round of layoffs of more than 9,000 people in the global market, with a layoff ratio of up to 20%. At the same time, Nissan was also selling its previously held shares in Mitsubishi Motors and delaying the release of new cars.
A similar situation also happened to Honda.
In the first 11 months of last year, Honda's cumulative sales in China fell 30.7% year-on-year to 740,400 units, still in a "continuous decline" trend.
At that time, Honda pointed out that despite strong performance in the U.S. and Japanese markets, operating profit for the current quarter fell 15% year-on-year to 257.9 billion yen due to declining sales in Southeast Asia and China.
As a result, Honda's operating profit fell year-over-year for the first time in the past seven quarters.
At the same time, Honda also lowered its performance guidance again, expecting a greater decline in net profit, raising its previous guidance for a 9.7% decline to 14%.
Sales in fiscal 2024 were previously expected to be 3.9 million vehicles, but guidance has now been lowered to 3.8 million vehicles. Group vehicle sales in the first half of 2024 fell 8% to 1.78 million vehicles. Honda's revenue rose 12% in the six months ended September 30, but fell short of market expectations.
After the news of the merger between Nissan and Honda came out, the stock prices of Nissan and Honda rose slightly. But looking over a long period of time, Nissan's stock price has fallen by about 39% so far last year, and the company's current market value is about $8 billion. Honda shares fell about 18%, giving it a market value of about $40 billion.
Therefore, this is not so much a powerful alliance as an emergency self-rescue.
Whose "match" is it for?
From the perspective of the outside world, Toyota and Nissan have already begun to cooperate in order to cope with external competition, and this merger is also expected.
But in fact, there is a huge driving force behind the fact that Honda and Nissan, originally hostile companies, have turned enemies into friends overnight and are in unison with the outside world - the Japanese government.
Japan has always been proud of its manufacturing industry.
Koo Chaoming, chief economist at Nomura Research Institute in Japan, mentioned in an interview that the Japanese are meticulous and they can polish all the technologies in their hands to the best. If one generation cannot do it, then one generation after another will do it.
It is precisely with this experience and advantages in lean production and quality management that we have started to promote k-car and stimulate domestic demand in Japan, and then launched a variety of energy-saving and durable products to explode the global market.
Since the 1950s,Japan's automobile industry truly became the driving engine for the country's economic boom during the Showa era.
At that time, Japan owned so many assets around the world. Perhaps you may have heard about the Rockefeller Center, golf courses and office buildings in Los Angeles purchased by the Japanese.The biggest ambition of the Japanese at that time was even to "buy the United States."
But the times can only give you a small push on the road to rise. Whether you can go well in the future actually depends on yourself. Nissan, an important participant in this restructuring, encountered a business crisis as early as 20 years ago.
At that time, Nissan executives once said to the outside world that Nissan had made two major mistakes. The first time was in the 1970s and 1980s, when Nissan borrowed heavily to expand overseas and set up branches. The practice of prioritizing quantity over quality caused Nissan to fall into a financial crunch during the bubble economy.
The second time was in the early 1990s. Nissan had actually developed an SUV model earlier, but due to hesitation in launching it on the market and insisting on selling mainly sedan products, it missed the development opportunity.
Because of this, Nissan was forced to sell itself to Renault in 1999 to avoid bankruptcy and closure. Later, under the leadership of "cost killer" Ghosn, Nissan was able to embark on the road to recovery.
Then there’s the Japanese version of Escape from Tehran. Ghosn was put on a private plane and fled Japan. Nissan sold 1.564 million vehicles in China that year and has since reached its peak. Because Nissan was nothing more than a replica of Ghosn, in the following years, Nissan gradually reached the edge of danger.
At this time, Foxconn's parent company, Hon Hai Precision Industry, was eyeing Nissan's equity, especially Nissan's shares held by Renault in a trust bank. Guan Run, Hon Hai's chief strategy officer who is responsible for this acquisition, is not an unknown person.
This person has served Nissan for 33 years and has held important positions including executive director, president of Dongfeng Motor Co., Ltd., and senior vice president of the Renault-Nissan-Mitsubishi Alliance. It can be said that he has a deep connection with Nissan.
As early as 2019, the Japanese government intended to "bring together" a merger between Nissan and Honda.
In 2020, the British "Financial Times" also revealed that the Japanese government is worried that countries in various countries are pursuing electrification too fiercely, and Japanese gas vehicles will slowly lose their advantages and will be eliminated, so they want to unite the two.
But at the time, this merger was a wishful thinking of the Japanese government, just to allow the more profitable Honda to "bring brothers together." However, although Nissan is interested in joining, Honda's willingness is not strong. Both parties immediately refuted the rumors of merger.
Until Hon Hai Precision's intervention this time, Japan, which has a manufacturing industry and automobiles as a pillar industry of the national economy, must not allow it to be invaded by a third party at this stage of reshuffling the automobile industry. Therefore, the Japanese government once again asked Honda to "save a brother," which led to this merger.
This is obviously the fundamental reason driving the integration of Honda and Nissan.
However, this "merger" is a merger in which the Japanese government pursues "economic security" in an industrial sense, and it is also very likely to lay a huge foundation for the future integration of the two companies after the merger.
With tickets in hand, you may not be able to get on the right boat.
From the perspective of national industry, Honda and Nissan are understandable. Ghosn, who held a press conference on the same day the merger was announced, also expressed this view.
However, many people are pessimistic about the future direction after the merger. Even in Japan, there are not a few people who hold this view.
In the eyes of the Japanese media and the public, this merger can only be regarded as a difficult self-rescue, allowing them to have a chance to compete in the new era.
For example, "Nihon Keizai Shimbun" wrote an article saying, "This expansion of scale will enable the new company to have stronger market competitiveness and cost competitiveness, helping to cope with competition from Tesla and Chinese electric vehicle manufacturers... But the scale of 8 million vehicles is not a guarantee of victory, but just a ticket to a new era."
To be fair, although Japanese cars are losing ground in the Chinese market,But they used to be the overlords in the traditional automobile industry era, and they are still a force that cannot be underestimated.
Some people believe that the merger of Honda and Nissan is not an "alliance of losers", but an overtaking in solid-state batteries. Solid-state batteries are the only card that Japan can use to compete with BYD Tesla in the second half of the electric vehicle market.
As we all know, solid-state batteries have become recognized as the first choice for the next generation of batteries. Japan has long placed the development of solid-state batteries at the height of its national industrial strategy, and leads the world in the number of solid-state battery R&D and patents.
Taking Nissan as an example, although its publicity in solid-state batteries has been relatively low-key, its strength is impressive. According to 2023 data, nearly 45% of the number of patent applications in the global solid-state battery field comes from Japan. Among them, Toyota is the company with the largest number of patent applications, and Nissan ranks second, second only to Toyota.
Therefore, the merger of Nissan and Honda can build a thicker technical wall, and the speed and progress of solid-state battery research and development may be accelerated. It is even expected to surpass Toyota and become the world's number one solid-state battery patent manufacturer in terms of solid-state battery patents. Even the peak of the current market structure of new energy vehicles.
But this argument ignores an important fact——Japanese car companies were also the first to develop new energy vehicles that use electricity as energy source. Toyota's Prius is the world's first mass-produced product that combines an energy architecture with batteries and a small-displacement internal combustion engine.
If you have memories of the Chinese auto market eleven or twelve years ago, then you will remember how Toyota and Lexus launched light hybrid vehicles in an attempt to change the energy landscape. Also more than ten years ago, Nissan launched the pure electric model Leaf.
But the result is that the Japanese automobile industry still misses the opportunity to lead again in the electrification era.
In terms of the distribution of battery vehicles, in the first three quarters of this year, two of the top five global power battery manufacturers were from China and three from South Korea.
The reason behind this is not that Japan's basic skills are not solid, nor is it the rumored wandering on energy lines. Rather, it lacks a market for large-scale mass production and a national policy that responds to everything.
As early as 2021, Japan proposed the "Green Dream" carbon neutrality target plan. It aims to ban the sale of fuel vehicles around 2035 and achieve the goal of all new cars sold in Japan being electric vehicles.
In order to promote the development of new energy vehicles, the Japanese government will double the consumption subsidies for pure electric vehicles at the end of 2021, up to a maximum of 800,000 yen (approximately 41,000 yuan).
What is unexpected is that not only are Japanese car manufacturers not positive in their attitude toward transformation, but even end consumers' acceptance of new energy vehicles is very average. Even Tesla, which has very good global sales, only sells about 4,000 to 5,000 vehicles in the Japanese market a year.
in other words,The solid-state tram technology that Japan is proud of is not focused on the technology itself, but on mass production applications.In the world, only China can quickly implement a technology and popularize it in a very cost-effective way.
This is why the current Chinese new energy vehicle market is obviously an extremely cruel Shura field, but no matter which country's car companies they are, they are unwilling to leave this market, and they also want to cooperate with Chinese car companies and learn from their experience. Because as long as we are still in this market, it means that the new energy vehicle era itself is still at this table.
What's more, the next stage of electrification is intelligence, which means mobile Internet, in-vehicle applications, operating systems, artificial intelligence... This is what the new generation of consumers likes. The intelligence capabilities of Japanese companies have long been solidified in the mobile phone era - "hardware but no intelligence."
From the current point of view, for Nissan, Honda, and even Mitsubishi, integration is only the first step to solve the immediate problems. But the follow-up questions are actually not missing at all. Mitsubishi is also likely to merge in, as Nissan is currently the largest shareholder of Mitsubishi Motors.
In the future, the three brands will be unified into one, and product routes and market segments will be redefined. Or develop independently under a large group. How to balance this relationship that is both unified and independent, both collaborative and competitive, has become another major test for the new group.
If you have a ticket, you won't be able to board the correct boat. What awaits the merged company may still be recession.