What a Nissan-Honda merger means for automakers and the industry

BANGKOK (AP) — Japanese automakers Honda and Nissan will seek to merge and create the world’s third-largest automaker by sales as the industry undergoes dramatic changes as it shifts away from fossil fuels.

The two companies said they signed a memorandum of understanding on Monday and that smaller Nissan alliance member Mitsubishi Motors had also agreed to take part in talks to integrate their businesses. Honda will initially be led by new management while maintaining the principles and brands of each company.

Here’s a quick look at what a Honda-Nissan merger would mean for the companies and the automotive industry.

An industry shake-up

The rise of Chinese automakers is shaking up the industry at a time when manufacturers are struggling to switch from fossil fuel vehicles to electric vehicles. Relatively inexpensive electric vehicles from Chinese manufacturers BYD, Great Wall and Nio are eating up the market share of U.S. and Japanese automakers in China and elsewhere.

Japanese automakers have lagged behind their major rivals in electric vehicles and are now trying to cut costs and make up for lost time.

Nissan, Honda and Mitsubishi announced in August that they would share electric vehicle components such as batteries and jointly research autonomous driving software to better adapt to dramatic changes in the automotive industry around electrification. In March, a tentative agreement was announced between Honda, Japan’s second-largest automaker, and Nissan, the third-largest.

Based on the market capitalization of all three automakers, a merger could result in a behemoth worth about $55 billion.

Joining forces would help smaller Japanese automakers expand their size to compete with Japan’s market leader Toyota Motor Corp. and the German Volkswagen AG. Toyota itself has technology partnerships with the Japanese company Mazda Motor Corp. and Subaru Corp.

What would Honda need from Nissan?

“Nissan has large truck-body SUVs like the Armada and Infiniti QX80 that Honda doesn’t have, with large towing capacity and good off-road performance,” said Sam Fiorani, vice president of AutoForecast Solutions.

Nissan also has years of experience building batteries and electric vehicles as well as gas-electric hybrid powertrains that could help Honda develop its own electric vehicles and the next generation of hybrids, he said.

“Nissan has some product segments that Honda isn’t playing in right now,” said Sam Abuelsamid, a Detroit-area auto industry analyst, saying a merger or partnership could help.

Although Nissan’s electric Leaf and Ariya haven’t sold well in the U.S., they are solid vehicles, Fiorani said. “They haven’t rested on their laurels and continued to develop this technology,” he said. “They have new products on offer that could provide Honda with a good platform for the next generation.”

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