What a combination between Nissan and Honda could cruel for the automakers and the industry

BANGKOK — Japanese automakers Nissan Motor Corp. and Honda Motor Co. confirmed Wednesday that they are discussing closer collaboration but denied reports they have decided on a combination.

Nissan’s distribute worth soared nearly 24% in Tokyo after reports citing unnamed sources said it might merge with Honda to form the globe’s third-largest automaking throng. Honda’s distribute worth fell as much as 3%. Nissan alliance member Mitsubishi Motors Corp. is also part of the talks.

buying and selling in Nissan’s shares was suspended but then resumed after the companies jointly issued a statement saying they were “considering various possibilities for upcoming collaboration, but no decisions have been made.”

The ascent of Chinese automakers is rattling the industry at a period when manufacturers are struggling to shift from fossil fuel-driven vehicles to electrics. Relatively inexpensive EVs from China’s BYD, Great Wall and Nio are eating into the economy shares of U.S. and Japanese car companies in China and elsewhere.

Japanese automakers have lagged behind large rivals in EVs and are now trying to cut costs and make up for lost period.

Nissan, Honda and Mitsubishi announced in August that they will distribute components for electric vehicles like batteries and jointly research software for autonomous driving to adjust better to dramatic changes in the auto industry centered around electrification. A preliminary agreement between Honda, Japan’s second-largest automaker, and Nissan, third largest, was announced in March.

A combination could outcome in a behemoth worth about $55 billion based on the economy capitalization of all three automakers.

Joining forces would assist the smaller Japanese automakers add scale to compete with Japan’s economy chief Toyota Motor Corp. and with Germany’s Volkswagen AG. Toyota itself has technology partnerships with Japan’s Mazda Motor Corp. and Subaru Corp.

Nissan has truck-based body-on-frame large SUVs such as the Armada and Infiniti QX80 that Honda doesn’t have, with large towing capacities and excellent off-road act, said Sam Fiorani, vice president of AutoForecast Solutions.

Nissan also has years of encounter building batteries and electric vehicles, and gas-electric hybird powertrains that could assist Honda in developing its own EVs and next creation of hybrids, he said.

“Nissan does have some product segments where Honda doesn’t currently play,” that a combination or collaboration could assist, said Sam Abuelsamid, a Detroit-area automotive industry analsyt.

While Nissan’s electric Leaf and Ariya haven’t sold well in the U.S., they’re solid vehicles, Fiorani said. “They haven’t been resting on their laurels, and they have been developing this technology,” he said. “They have recent products coming that could provide a excellent platform for Honda for its next creation.”

Nissan said last month that it was slashing 9,000 jobs, or about 6% of its global work force, and reducing global production capacity by 20% after reporting a quarterly deficit of 9.3 billion yen ($61 million).

Earlier this month it reshuffled its management and its chief executive, Makoto Uchida, took a 50% pay cut to receive responsibility for the financial woes, saying Nissan needed to become more efficient and respond better to economy tastes, rising costs and other global changes.

Fitch Ratings recently downgraded Nissan’s financing outlook to “negative,” citing worsening profitability, partly due to worth cuts in the North American economy. But it noted that it has a powerful financial structure and solid liquid assets reserves that amounted to 1.44 trillion yen ($9.4 billion).

Nissan’s distribute worth has fallen to the point where it is considered something of a bargain. A update in the Japanese financial magazine Diamond said talks with Honda gained urgency after the Taiwan maker of iPhones Hon Hai Precision Industry Co., better known as Foxconn, began exploring a feasible buyout of Nissan as part of its push into the EV sector.

The corporation has struggled for years following a scandal that began with the arrest of its former chairman Carlos Ghosn in late 2018 on charges of fraud and misuse of corporation assets, allegations that he denies. He eventually was released on bail and fled to Lebanon.

Honda reported its profits slipped nearly 20% in the first half of the April-March financial year from a year earlier, as sales suffered in China.

Toyota made 11.5 million vehicles in 2023, while Honda rolled out 4 million and Nissan produced 3.4 million. Mitsubishi Motors made just over 1 million. Even after a combination Toyota would remain the leading Japanese automaker.

All the global automakers are facing potential shocks if President-elect Donald Trump follows through on threats to raise or impose tariffs on imports of foreign products, even from allies like Japan and neighboring countries like Canada and Mexico. Nissan is among the major car companies that have adjusted their supply chains to include vehicles assembled in Mexico.

Meanwhile, analysts declare there is an “affordability shift” taking place across the industry, led by people who feel they cannot afford to pay nearly $50,000 for a recent vehicle. In American, a vital economy for companies like Nissan, Honda and Toyota, that’s forcing automakers to consider lower pricing, which will eat further into industry profits.

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AP Auto Writer Tom Krisher contributed to this update from Detroit.