Why Honda is merging with Nissan: factories, SUVs, and China

Honda’s potential merger with Nissan would characterize one of many largest shake-ups to the business for the reason that creation of Stellantis in 2021. However there are big dangers concerned, too.

On Tuesday in Las Vegas, throughout a roundtable dialogue with choose media, Honda executives supplied some extra perception into the merger, together with how combining assets and factories may assist the businesses keep aggressive within the more and more expensive combat with China.

Honda is anxious about China’s meteoric rise as a dominant and extremely aggressive participant within the EV and autonomous driving house. In late December, when Honda and Nissan introduced that they’d signed a memorandum of understanding to create an automotive firm price round $50 billion, Honda CEO Toshihiro Mibe mentioned that the “rise of Chinese language automakers and new gamers has modified the automotive business quite a bit… Now we have to construct up capabilities to combat with them by 2030, in any other case we’ll be crushed.”

The stakes are excessive, too. In line with a latest report by S&P World Mobility, the worldwide EV market will develop practically 30 p.c yr over yr, with 89.6 million new EVs anticipated to be bought this yr. In line with Allied Market Analysis, the worldwide autonomous car market is anticipated to achieve round $60.3 billion in 2025 and is projected to achieve $448.6 billion by 2035. If the Japanese automakers need to proceed to dominate the market as they’ve for the reason that Sixties, they must iterate rapidly and get merchandise into customers’ palms. 

“For the reason that starting of final yr, we’ve been in dialog with Nissan,” Noriya Kaihara, director and government vice chairman at Honda, mentioned by a translator following the corporate’s debut of two “manufacturing prototypes,” the Honda 0 Saloon and the Honda 0 SUV at CES. “Nothing has been determined however we’ve been discussing the way to proceed.” 

Throughout the roundtable, Kaihara mentioned that Honda is taking a look at Nissan as a approach to cut back prices round future software-defined autos (SDV). 

“Now we have important labor and improvement prices, and if there are operations we may share, that might be good for us,” he mentioned. Growing brand-new software program, he continued, together with superior driving techniques that transfer nearer to autonomous autos and battery-electric autos, is each more and more essential for the longevity of established automakers and more and more costly.  

Honda additionally mentioned that Nissan’s giant SUVs just like the Armada and Pathfinder make it a horny companion. Toshihiro Akiwa, VP and head of Honda’s BEV improvement middle, mentioned by a translator that Honda’s hybrid expertise is stable however solely presently exists in its midsize autos just like the CR-V and the Accord. The corporate is all in favour of Nissan’s bigger autos as a result of Honda’s “motor and battery capability will be tailored to the bigger car.”

Whereas Honda does have the Prologue, that car was a part of a $5 billion three way partnership with GM that solely lasted by the event of two autos. The Prologue has been a shock EV hit, promoting over 33,000 in 2024 and outselling the bigger gas-powered Honda Passport.

Since the partnership with GM went south, it’s not going that the Prologue shall be in manufacturing lengthy, although Honda has made no bulletins about its plans for the car. Honda doesn’t presently supply an all-electric crossover outdoors of the Prologue, although followers of the model have been asking for an all-electric CR-V for years. 

Nissan, however, noticed its earnings decline by as a lot as 90 p.c final yr, forcing it to put off 1000’s of workers. The corporate has been struggling for the reason that arrest of former Nissan CEO Carlos Ghosn in 2018 for monetary misconduct. Unsurprisingly, Ghosn isn’t happy concerning the information, telling Bloomberg that Nissan was in “panic mode,” calling the deal a “determined transfer” and noting that the “synergies between the 2 firms are tough to search out.”

However as Honda executives on the roundtable famous, Nissan’s battle may pose a chance for Honda, too. That’s as a result of Honda vegetation that serve the US are presently operating at most capability, they usually may use the surplus capability at Nissan’s factories to satisfy buyer demand. “I’m not able to make remark [on Nissan], however they’ve capability,” Kaihara mentioned.

President-elect Donald Trump’s threats to impose tariffs on international imports and get rid of federal subsidies which have helped save People billions in EV prices additionally got here up within the dialog. “If Trump impacts future authorities technique now we have to be very versatile when the subsidies are minimize or stopped,” Kaihara mentioned. 

That features the place Honda builds and produces its hottest autos just like the CR-V and Civic. “Every manufacturing unit in Canada and Mexico is sort of to full manufacturing degree,” Kaihara mentioned. “It’s not really easy to alter that course, however relying on the tariff scenario, we would have to alter the manufacturing location to Japan or someplace else.” 

A major transfer like that might be expensive and will translate to elevated costs for customers after they go to purchase their subsequent Honda.  

Regardless of all this, Honda is just not wavering on its dedication to electrification. “In the intervening time, we can have new EVs within the subsequent yr for the Zero collection,” Kaihara mentioned. “For the long run, I believe, contemplating the environmental points, EVs would be the answer for the longer term, and that won’t be modified.”