Today’s FOMC meeting might be grabbing the headlines, but last night, a significant development in the auto industry kept things buzzing. Honda and Nissan are working on forming a new partnership that could potentially rescue Nissan from looming bankruptcy concerns. Details are still under wraps, but it looks like Mitsubishi Motors, where Nissan holds the majority stake, might also play a part in this emerging automotive powerhouse.
At a glance: The proposed collaboration—whether it takes the form of a merger, alliance, or shared ownership—would essentially reshape Japan’s auto market into two major segments. One segment would revolve around Honda, Nissan, and Mitsubishi, while the other would include Toyota and its affiliates like Subaru, Mazda, and Suzuki. Earlier this year, Honda and Nissan began joining forces in the realm of electrification, further solidifying these ties through collaborations on battery technology and software, with Mitsubishi joining those efforts in June.
As is the case with other consumer electronics, vehicles have become notably more advanced over the past decade. This technological shift prompted a competitive race in the “software-defined vehicle” market. Automakers that fail to modernize their vehicle architecture risk finding themselves at a significant disadvantage, possibly even facing financial peril. The struggle to direct huge investments towards EV development while maintaining technology advancements has pushed traditional automakers into new alliances—take the Rivian and Volkswagen partnership, for instance—to stay relevant in today’s fiercely competitive automotive landscape.
On the other end of the spectrum, new companies have swiftly adapted to and even helped shape the SDV landscape and advancements in electrification. Consider leaders like Tesla and China’s BYD, renowned for their cutting-edge innovations and capability to update features over the air long after the vehicles leave the production line. These companies excel in streamlining production and development processes internally, optimizing profit margins by managing extensive parts of their supply chains, from component procurement to battery production.
Can this partnership succeed? Honda and Nissan’s efforts aim to heighten their global competitiveness, particularly in markets like China, which represented nearly 70% of global EV sales last November. This initiative promises stability and improvement in reputation and finances for Nissan, particularly as it attempts a comeback from its early LEAF success. While some industry watchers ponder the tangible benefits for Honda, the collaboration could offer cost-saving measures through shared resource use, enhanced technological investments, and a boost to Honda’s EV agenda. Whether or not these automotive giants can successfully integrate their distinct corporate cultures is still up for debate, with Honda’s shares slipping by 3% in premarket trading in the U.S. and Nissan witnessing a remarkable surge of 24% in Japan, making it a standout performer on the Nikkei 225 Index.
