在传统汽车制造商尝试应对销量下降、股价下跌和来自电动汽车制造商的竞争加剧等问题之际，日本汽车制造商Source: Barron's Chinese
Author: Elsa Orane
If the two companies successfully merge, this merger will put pressure on other medium-sized Auto Manufacturers, at least prompting them to consider taking similar actions. Historically, operating on a larger scale has advantages, but it does not necessarily guarantee success.
"The bigger, the better" may become a development trend in the future Auto Industry.
As traditional Auto Manufacturers attempt to cope with declining sales, falling stock prices, and increased competition from electric vehicle manufacturers, Japanese Auto Manufacturers$Honda Motor (HMC.US)$and$Nissan Motor (7201.JP)$Announcement of a planned merger.
On Monday (December 23),$Honda Motor (7267.JP)$Honda Motor and NISSAN MOTOR CO announced in a joint statement that they have signed a memorandum of understanding to explore synergies and integrate their Businesses through the establishment of a holding company. Reports last week indicated that the two companies plan to enter negotiations for the merger.
The merger is expected to be completed by August 2026. In terms of annual sales volume, the merger of Honda Motor and NISSAN MOTOR CO will create the world's third-largest Auto Manufacturers, only behind Toyota and Volkswagen.
The vision of Honda Motor and NISSAN MOTOR CO is to create a company with annual sales close to 200 billion dollars and operating profit of 20 billion dollars, but both companies have a considerable distance to reach this goal.
In the first half of the 2024 fiscal year, Honda Motor's sales were approximately 1.7 million units, while NISSAN MOTOR CO's sales were about 1.6 million units. Due to intensified price competition (especially in the China market), both companies experienced year-on-year declines in sales, and operating profit also decreased.
According to FactSet data, NISSAN MOTOR CO's operating profit for the 2025 fiscal year is expected to be around 1.3 billion dollars, with free cash flow projected to be zero, while Honda Motor's operating profit is expected to be about 10 billion dollars, with free cash flow around 2 billion dollars.
Both companies believe that over time, factors such as economies of scale, more efficient research and development, operational improvements, and cost reductions will drive performance improvements.
Honda Motor CEO Toshihiro Mibe said, "It is said that the auto industry undergoes a transformation every 100 years, and in this transformation, we can become a leading company that creates new value in the auto industry through business integration."
A century ago, one in ten Americans owned a car, and those cars were powered by gasoline. Now, there is an average of one car for every two Americans, and auto manufacturers must meet this demand by designing and producing gasoline-powered, hybrid, and fully electric models.
If Honda Motor and NISSAN MOTOR CO successfully merge, this merger will put pressure on other mid-sized auto manufacturers and at least prompt them to consider taking similar actions.
Operating at a larger scale has its benefits, but it does not guarantee success. The history of mergers among large auto manufacturers is mixed; the 1998 merger of Chrysler and Daimler is a typical case of failure.$MERCEDES-BENZ GROUP AG UNSP ADR EACH REP 0.25 ORD SHS (MBGYY.US)$After Daimler sold a large portion of its shares to private equity firms years later, Chrysler filed for bankruptcy in 2009.
Stellantis was formed by the merger of several companies, including Peugeot and Chrysler, and while it has achieved some success, operations in 2024 are struggling.
However, the news that Honda Motor and NISSAN MOTOR CO plan to merge has been welcomed by investors. Honda Motor's stock rose 12.22% on Tuesday, and its American Depositary Receipts ( $Honda Motor (HMC.US)$ ) rose 12.73% on Monday.
NISSAN MOTOR CO's stock rose 6% on Tuesday, while its American Depositary Receipts ( $Nissan Motor (ADR) (NSANY.US)$ ) declined slightly by 0.2% on Monday, as the stock had already begun to rise when the merger reports first emerged, accumulating an increase of about 24% last week.
Honda Motor and NISSAN MOTOR CO stated this March that both sides have initiated a "feasibility study or strategic partnership."
The two companies plan to finalize the merger agreement by June 2025 and aim to establish a new company listed on the Tokyo Stock Exchange by August 2026, at which point Honda Motor and NISSAN MOTOR CO will become subsidiaries of the new company.
Editor/Rocky