Japanese automobile companies Honda Motor Co. (JP:7267) and Nissan Motor Co. (JP:7201) are reportedly exploring a potential merger to strengthen their position in the EV market. According to Nikkei, both companies are holding preliminary discussions regarding a merger, capital tie-up, or creating a holding company. However, a final decision is yet to be reached. Following the news, Honda shares fell by 3.12% on Wednesday. On the other hand, Nissan shares gained over 20% in the early trading session before the Tokyo Stock Exchange halted its trading.
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Nissan, Honda to Combine as EV Race Intensifies
In recent years, Japanese automakers have been facing intense competition in the EV industry, which is currently led by China’s BYD Co. (HK:1211) and the American EV leader Tesla (TSLA). Honda and Nissan, which once had a strong foothold in major markets like China, are now finding it difficult to keep pace with the rise of affordable, software-driven EVs.
The two companies had previously established a strategic partnership in March to collaborate on EV development. Then, in July, Honda and Nissan expanded their cooperation to work on next-generation software-defined vehicles, with a focus on EV platforms, battery technology, and intelligent systems.
However, Nissan’s recent financial challenges and the growing competition in the industry have increased the urgency for deeper cooperation. In November, Nissan lowered its annual profit forecast by 70%, marking its second downward revision this year. It also announced a significant restructuring plan, which includes cutting around 9,000 jobs and reducing its manufacturing capacity.
The potential merger would enable Honda and Nissan to collaborate and to leverage synergies in procurement and technology development. Additionally, the merger would help them build a stronger domestic competitor to Toyota Motor (JP:7203) in Japan.
Is Nissan Stock a Buy?
According to TipRanks, 7201 stock has received a Moderate Sell rating, based on three Sell and one Hold recommendation. The Nissan share price target is ¥308.22, which is 8.7% lower than the current price level.
