Author | Wang Xiaojun

Editor | Zhou Zhiyu

The anxiety of survival in the Auto Industry is spreading globally.

Following the factory closures and layoffs of many traditional car manufacturers in Germany, the Japanese Auto Industry is also undergoing a series of tremors. The long-rumored merger negotiations between the Japanese Auto Manufacturers Nissan and Honda have recently entered negotiation stages. Furthermore, there are reports that Mitsubishi Motors may also join the merger talks.

Collaboration is also a way for companies to combat changes in the external environment.

In recent years, the market shares of Nissan, Honda, and Mitsubishi have been declining in major markets, gradually losing their competitive edge in fierce market competition. Data shows that in the first half of this year, the three companies collectively sold approximately 4 million Autos globally, far below Toyota, the leader among Japanese car manufacturers, which sold 5.2 million Units.

Although the survival concerns are most evident for Nissan, the overall brilliance of Japanese car manufacturers is also fading, and they are facing continued setbacks in the global market, all facing the dilemma of transformation.

The plight of Nissan.

Twenty days ago, two Nissan Auto Manufacturers executives expressed to the outside world that the company has only 12-14 months of turnover time, and the situation is getting worse, urgently needing Japan and the USA to generate Cash.

The market has just realized that this world-renowned auto giant has reached this stage. In fact, Nissan's decline began quite early.

In the fiscal year 2018, Nissan's total global sales were 5.516 million units, a decrease of 4.4%, marking the start of Nissan's decline. In terms of sales, from April to September this year, Nissan's global new vehicle sales decreased by 1.6% year-on-year to 1.596 million units. This sales performance is already incomparable to its peak period.

A series of even worse situations are directly reflected in the Earnings Reports.

By this year, in the first half of fiscal year 2024 (April to September this year), Nissan's net revenue fell 1.3% year-on-year to 5984.2 billion yen (approximately 290 billion yuan at the current Exchange Rates of about 20.6:1), operating profit declined 90.2% to 32.9 billion yen, and Net income was 19.2 billion yen, a year-on-year decrease of 93.5%.

The sharp decline in profit is a significant reason for the company to urgently seek mergers and other new avenues. Facing the overall situation in this fiscal year, Nissan is also extremely pessimistic, revising its originally forecasted surplus of 300 billion yen for the entire year's Net income to 'undetermined'.

Nissan's decline is mainly reflected in the drop in its largest market share in China and the USA.

Since last year, Nissan's main sales market in North America has stagnated in growth. In recent years, Nissan has introduced fewer new models, making it difficult to offer hybrid models that users prefer, leading many customers to be attracted to Toyota and Honda when choosing Japanese cars. Additionally, Nissan's dealerships in the USA are overly saturated, with intense competition, longer inventory cycles, and profit difficult to maintain.

In China, a decline has been the fate of most joint venture brands, and Nissan is no exception.

Since 2022, Nissan's sales in China have been declining at a double-digit rate almost every year. In 2022, sales in China were 1.0452 million units, a year-on-year drop of 22.1%; in the first 11 months of this year, Nissan's total cumulative sales were 0.6217 million units, a drop of 10.53% year-on-year. This means that this year it seems difficult to surpass the 0.7 million unit threshold.

Despite the global Auto Manufacturers industry undergoing a transformation, Nissan's decline is only one aspect of the transition issues. Since the change in the cooperative relationship between Nissan and Renault in 2018, Nissan has been in a state of chaos.

In recent years, Renault has gradually reduced its stake in Nissan, which has decreased from 43% to 15% this year. Internally, there have also been reports of internal strife and even several instances of massive losses, such as a net loss of 671 billion yen in the 2019 fiscal year.

This year, facing a difficult situation, Nissan is also striving for survival in various ways.

In addition to seeking mergers, there are also a series of cost-cutting plans, such as a 20% reduction in global production capacity, laying off 9,000 employees worldwide, and Nissan's Chief Executive Officer Makoto Uchida announced that he will voluntarily forgo 50% of his monthly salary starting in November, with other executive committee members also voluntarily reducing their salaries accordingly.

However, these measures hardly make the future more hopeful.

In response to the Chinese market, Nissan is also undergoing some transformations. Recently, Nissan announced that the current Chief Financial Officer (CFO) Stephen Ma will serve as the chairman of Nissan China's management committee.

Stephen Ma is considered a Nissan executive familiar with the Chinese market; he served as vice president of Dongfeng Motor Co., Ltd. in 2012, experiencing Nissan's rapid growth during the golden years in China, and returned to Nissan's headquarters in 2018 to take on the role of CFO.

Moreover, during the period of joint venture transformation, Dongfeng also provided significant support. Recently, Dongfeng Nissan stated that it would invest 10 billion yuan in the research and development sector. This year, Nissan has fully acquired the former Renault-Nissan-Mitsubishi Alliance Innovation Center (Shanghai) and established Nissan Technology Development (Shanghai) Co., Ltd., which will focus on electrification, autonomous driving, and vehicle networking.

United for change.

Currently, the century-old automotive industry is undergoing an unprecedented energy transformation, which will inevitably redefine the hierarchy among the companies involved.

The three major Japanese auto manufacturers were once global automotive giants, and Japanese cars were once bestsellers worldwide. Now, although Toyota remains strong, there are still concerns; the other two have been steadily declining and are on the brink of merger.

Additionally, this year, Toyota and other Japanese automakers have been exposed for a wide range of production violations and fraudulent models, which has harmed the reputation of Japanese cars.

According to the earnings reports for the first half of fiscal year 2025 released by seven Japanese companies, aside from Nissan, the net income of Toyota, Honda, Mitsubishi, and Mazda has decreased to varying degrees compared to the same period last year.

As early as 2022, the total new car sales of Japan's six major auto manufacturers in the USA decreased by 17.9% year-on-year; a large part of this loss was largely taken over by Tesla.

In the past two years, a more significant decline for Japanese cars has occurred in the rapidly transforming Chinese market. Since last year, joint venture cars have faced varying degrees of decline, with Japanese cars, which once dominated the mainstream market, losing market share to brands like BYD, showing almost double-digit year-on-year declines in sales every month.

For example, taking the sales data from the first 11 months of this year, FAW Toyota was relatively stable, with sales of 0.7014 million units, a decrease of 2.14%; GAC Toyota's sales were 0.7011 million units, down 14.94% year-on-year; Honda's overall terminal sales in China were 0.7404 million units, with sales down by 30%; Changan Mazda's sales were less than 0.07 million units, down 12.9%, and Mitsubishi exited the Chinese market in 2023.

According to data from the Passenger Car Market Information Association, the market share of Japanese cars in China has decreased from 22.6% in 2021 to 13.7%.

Meanwhile, some new changes are occurring in the Southeast Asian market, which has the highest loyalty for Japanese cars.

In recent years, Chinese automotive companies have turned their attention to Southeast Asia; for example, Thailand has multiple policies supporting the development of Electric Vehicles, which is evidently more favorable for Chinese Electric Vehicles companies going overseas.

Currently, merging seems to be the best way for several companies to warm up to each other. However, it does not appear so easy for interwoven giants to merge.

In 2019, after Nissan released an Earnings Report showing nearly halved operating profit and significant declines in various Indicators, the Japanese government pressured these two car manufacturers to consider merging.

However, the entanglement dragged on for several years, and only as Nissan's situation worsened step by step this year did the merger show more progress. In March and August of this year, Nissan, Honda, and Mitsubishi Motors announced their intention to integrate their respective strengths and explore various possibilities for cooperation.

In the midst of transformation, whether latecomers can successfully compete and whether traditional manufacturers can maintain their past advantages will depend on their ability to electrify and innovate in the era to provide products that meet the needs of target users.

This merger story will eventually come to an end, and in the future, if the merger materializes, the newly formed company will become the third largest auto manufacturer in the world. Whether the new alliance can launch products as popular as before in response to changing demands will depend on its performance thereafter.