Honda, Nissan seek stronger position against U.S., China rivals

Two major Japanese automakers are heading for a historic merger, as Honda Motor Co. and Nissan Motor Co. signed a basic agreement to start full-fledged talks on integrating their businesses Monday.

With the rise of electric vehicles manufactured by U.S. and Chinese companies, the auto market is undergoing a radical change. Much attention is being paid to whether the Honda-led business integration will enable the two companies to again assert their presence in the global market.

Environmental shifts

“The impact of synergies from the business integration will be greater than we expect,” Honda President Toshihiro Mibe stressed at a news conference Monday.

The two automakers will integrate their R&D functions and procurement operations to improve efficiency in all areas.

According to Mibe, the auto industry is facing a tectonic shift in which newcomers such as Chinese automaker BYD are coming to the fore with massive investments in EVs and software development. The two companies decided that traditional collaboration would not be sufficient to overcome the challenges they are facing, he said.

Given that Mitsubishi Motors Corp. is strong in the Southeast Asian market, where both Honda and Nissan have a weak presence, Mitsubishi’s participation in the business integration would allow them to draw up new global strategies.

The leaders of the three companies reported their discussions to the Economy, Trade and Industry Ministry on Monday morning.

However, there are many challenges to optimizing the effects of the business integration.

The most important market for both Honda and Nissan is North America. Their core car models are similar, as both companies focus on sports utility vehicles. Nissan does not sell hybrid vehicles in North America, and the business integration may enable it to put its HVs into the North American market at an early date.

Meanwhile, the business integration will benefit Honda by helping the company increase the sales of HV systems. The two auto brands, however, could end up competing with each other over customers in the same market. “Having strength in the same region will bring about more synergies,” Nissan President Makoto Uchida stressed. The future of the business integration, however, is uncertain.

Another challenge is the realignment of their business partners. According to Tokyo Shoko Research, Ltd., the three automakers have a total of nearly 30,000 business partners in Japan. Of this number, over 5,000 companies do business with both Honda and Nissan and produce the same parts for each of them. Streamlining the contractors is an urgent issue.

Mibe emphasized that he did not deny the possibility of the business integration falling through, depending on Nissan’s restructuring measures.