Japanese auto makers Honda Motor Co. and Nissan Motor Corporation on Wednesday clarified that they are discussing closer collaboration, but added that they have not taken any decision regarding a merger.
Nissan shares surged nearly 24 percent in Tokyo after unnamed sources reported that Nissan could merge with Honda to create the world's third-largest automaking group. At the same time, Honda shares fell by 3 percent. Nissan's alliance partner Mitsubishi Motors Corp is also part of the talks.
Although trading of Nissan shares was briefly suspended, the two companies later issued a joint statement allowing it to resume. The statement said that they are considering various possibilities for future cooperation.
Stir among industry manufacturers
The ongoing turmoil in the industry has highlighted the need for a shift in a new direction. The growing presence of Chinese automakers has given rise to a new competition in the global market, especially as traditional manufacturers attempt to move away from fossil fuels to electric vehicles. Companies such as BYD, Great Wall and Nio have impacted the market share of American and Japanese carmakers through their affordable electric vehicles, creating a new competitive environment in the industry.
Japanese automakers have been slow to respond to this change and now lag behind their competitors. Nissan, Honda and Mitsubishi recently announced that they will share critical components such as batteries for electric vehicles and jointly develop research software for autonomous driving. This move will not only help in reducing their costs but will also accelerate their progress towards electrification.
The consolidation will help smaller Japanese automakers increase their size to compete with Japan's major Toyota Motor Corp and Germany's Volkswagen AG. Toyota has already established technology partnerships with Japan's Mazda Motor Corp. and Subaru Corp., making it clear that competitive advantages can be gained from collaboration.
What expectations does Honda have from Nissan?
Information on this has been given in media reports. According to Sam Fiorani, vice president of AutoForecast Solutions, Nissan has truck-based body-on-frame large SUVs such as the Armada and Infiniti QX80, which Honda does not. These vehicles are known for large towing capacity and excellent off-road performance, which could be a significant opportunity for Honda.
Fiorani also pointed out that Nissan has years of experience making battery and electric vehicles as well as gas-electric hybrid powertrains. This experience could provide significant assistance to Honda in developing its own electric vehicles and next-generation hybrids, increasing the potential for collaboration between the two companies.
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