Mumbai (Bike and Car Desk): In a world racing towards electrification, where the battle for innovation has intensified, two Japanese automotive giants—Nissan and Honda—are contemplating a bold move: a potential merger. The merger, if finalized, could create the world’s third-largest automaker, a behemoth capable of producing nearly 7.5 million vehicles annually, trailing only behind Toyota and Volkswagen. But will combining two lagging players in the electric vehicle (EV) revolution result in a competitive powerhouse?
The Catalyst: China’s Dominance in EVs
China’s growing dominance in the EV market, spearheaded by companies like BYD, has sent ripples across the global automotive industry. Once the torchbearers of automotive innovation, traditional automakers like Nissan and Honda now find themselves playing catch-up in the rapidly evolving landscape of electrification and autonomous technology.
“China has emerged as the epicenter of EV innovation,” says Professor Stefan Bratzel, Director of Germany’s Center of Automotive Management. “This has created an existential crisis for companies that lag behind in the race to electrify, forcing them to either adapt or risk obsolescence.”
Both Nissan and Honda, despite their storied histories, have struggled to assert dominance in the EV and software-defined vehicle markets. This has left them vulnerable to market shifts and mounting competition from both established players like Tesla and emerging Chinese automakers.
Merging for Survival, Not Strength?
The proposed merger is being viewed as a survival strategy. By pooling resources, the two automakers aim to cut costs, accelerate EV development, and strengthen their foothold in a market dominated by giants. Investment researcher Jefferies highlights the potential benefits: “A Honda-Nissan combination would create a top-three manufacturer, with scale across regions and accelerated technology development in EVs, autonomous vehicles, and software.”
Yet, skepticism remains. Mergers in the automotive industry often bring logistical challenges, cultural clashes, and operational inefficiencies. Stellantis, the result of a merger between Fiat Chrysler and PSA Group, serves as a cautionary tale. While initially profitable, the company recently faced internal turmoil that culminated in the loss of its CEO, Carlos Tavares. “A well-executed merger could buy Nissan and Honda time,” notes Antony Currie, a BreakingViews columnist. “But if they fail to produce vehicles that customers want at competitive prices, the union could easily derail.”
Uncertain Path to Electrification
As Nissan and Honda consider the union, their current obstacles come to the surface. While the two companies have fewer electric car models than their rivals, like Tesla and Hyundai, the car industry is moving forward very rapidly. Therefore the outdated Nissan Leaf, once a star player, cannot withstand the fierce onslaught of the increasing number of new electric vehicless. At the same time, Honda has been slow in its commitment to the electric vehicle market and plans only now to take on the competition of other manufacturers such as Chevy and Toyota.
In another twist, the company Nissan is still holding on to the alliance with Renault, which, however, is going downhill. An alliance with Honda could be an opportunity for Nissan to split from Renault thus bypassing all the hurtles, but at the same time, it can also instill the new company with a tough desire to deliver.
The Road Ahead: A Gamble for the Future
Alongside the global automotive industry, Nissan and Honda’s future appears to be more critical than before. The discussions about their merger are a sign that it is not only a strategic response to market pressure but a wider embracing or dismissing of older carmakers in the EV era.
Does this merger bring about a strong competitor that will put Nissan on the front, or will it only buy the company some more time before it eventually meets its end? The key to that question is their capability to change, adapt, and seize the opportunities electrification offers. Currently, the whole sector is in the durst as the destiny of two timeless car brands is being decided.
