The auto industry could be on the verge of a major shakeup, with Nissan (NSANY) and Honda (HMC) reportedly in talks to merge. Japan’s Nikkei first broke the news, followed by a Bloomberg report that Taiwan’s Foxconn approached Nissan about a stake, which pushed talks forward. A formal agreement could be signed as soon as December 23, and if it happens, the combined company would become the world’s third-largest automaker, behind Toyota (TM) and Volkswagen (VWAGY). Unsurprisingly, Nissan shares soared after the news.
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For Nissan, this deal could be a lifeline. The company has been struggling with declining global sales and razor-thin margins, while its EV-focused strategy hasn’t delivered the results it hoped for. Sales of the Ariya EV have been weak and have led to heavy discounts that hurt profits. Honda, on the other hand, is thriving with its hybrid lineup, which has resulted in strong U.S. growth. Nissan’s challenges are even worse in China, where fierce competition has cut its sales in half since 2019.
Chinese Automakers Forcing a Change in Strategy
Meanwhile, the rise of Chinese automakers like BYD, Nio (NIO), and Li Auto (LI) is forcing legacy carmakers to rethink their strategies. BYD, in particular, is poised to overtake Ford (F) and even Honda in global sales this year, which shows just how quickly the landscape is changing. With mounting pressure from low-cost Chinese competition, Nissan and Honda’s potential merger highlights how automakers are scrambling to adapt to this rapidly changing market.
Is Honda Stock a Good Buy?
Using TipRanks’ technical analysis tool, the indicators seem to point to a negative outlook for Honda stock. Indeed, the summary section pictured below shows that five indicators are Bullish, compared to two Neutral and 15 Bearish indicators.
