{"id":99118,"date":"2024-12-24T00:00:00","date_gmt":"2024-12-24T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/uae\/honda-nissan-and-mitsubishi-eye-potential-usd-58-bn-merger-amid-rising-ev-competition\/"},"modified":"2024-12-24T00:00:00","modified_gmt":"2024-12-24T00:00:00","slug":"honda-nissan-and-mitsubishi-eye-potential-usd-58-bn-merger-amid-rising-ev-competition","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/uae\/2024\/12\/24\/honda-nissan-and-mitsubishi-eye-potential-usd-58-bn-merger-amid-rising-ev-competition\/","title":{"rendered":"Honda, Nissan, and Mitsubishi eye potential USD 58 bn merger amid rising EV competition"},"content":{"rendered":"

The single biggest story on Planet Finance is the possible merger of automobile gia<\/strong>nts Honda and Nissan<\/strong>, after the two companies inked an MoU to explore a possible merger, aiming to create the world\u2019s third-largest automaker by sales, according to a statement<\/a> yesterday.<\/p>\n

Is Mitsubishi in? <\/strong>The talks, which could also include Mitsubishi Motors, who is set to decide whether to formally join the merger talks next month, according to a separate MoU<\/a>, are set to finalize by June 2025, with a holding company established by 2026. The transaction would bring the combined valuation of Honda and Nissan to USD 54 bn according to their current market caps, and to USD 58 bn if Mitsubishi were included. This would put them only behind Toyota and Volkswagen in terms of size, the Financial Times<\/a> reports. The two companies would aim for combined sales of JPY 30 tn yen (USD 191 bn) and operating profit of more than JPY 3 tn yen. <\/p>\n

The automakers say it is a competitive play:<\/strong> The merger is part of a broader strategy to maintain competitiveness amid \u201cdrastically changing business dynamics,\u201d Honda CEO Toshihiro Mibe said, with Chinese EV makers and Tesla rapidly gaining traction against the Japanese automotive sector. \u201cWe have to build up capabilities to fight with them by 2030, otherwise we'll be beaten,\u201d Mibe said. The need for scale represents a forward-looking strategy and is \u201cnot a rescue of Nissan,\u201d Mibe added.<\/p>\n

What\u2019s the issue with Nissan? <\/strong>The Japanese automaker recently announced<\/a> a 20% cut in global production capacity and plans to slash 9k jobs following a 90% drop in operating profit in the first half of the fiscal year. According to Reuters<\/a>, Nissan\u2019s weakened financial position has raised speculation that the merger is a lifeline, despite denials from both CEOs. <\/p>\n

The challenge? <\/strong>Creating meaningful synergies and avoiding past merger pitfalls, such as DaimlerChrysler's failed union, the New York Times<\/a> said. The FT and Reuters forecast that the merger could face hurdles \u2014 including resistance from shareholders and regulatory approvals \u2014 on the back of Nissan\u2019s weaker financial footing amid profitability concerns and declining sales in its largest market, China. <\/p>\n

Honda and Nissan plan to share platforms and resources to cut costs<\/strong>, focusing on EVs, autonomous driving technologies, and software development. However, its scale still may fall short of providing a competitive edge against Tesla and Chinese automakers, lauded for their cost-efficient production and technological advancements, the NY Times reports.<\/p>\n

Market reax: <\/strong>Honda\u2019s shares climbed up 13.4% on the news, benefiting from a separate share buyback announcement, while Nissan shares fell 7% on the Tokyo Stock Exchange, and Mitsubishi Motors gained 0.3%.<\/p>\n

ALSO WORTH KNOWING ON PLANET FINANCE- <\/p>\n