Just last week I wrote about the trouble Infiniti is in, and what they can do to right the sinking ship. But the problem really is much larger, and now comes news of a Nissan-Honda merger. You can find a million financial and political reasons, but I want to look at it from a car perspective.
What if Honda is trying to kill Nissan?
How badly is Nissan really doing?
Pretty badly. They’ve reduced production in the US by 17 percent over the past few months, and the issue with that is it will cut into Rogue and Frontier stock, their two best-selling models. They’ve listed 149 million shares of Mitsubishi for sale. I could go on, but without help, they have less than 17 months to live.
Enter Honda.
Back in August, Honda, Mitsubishi, and Nissan announced they would work together to build electric vehicles and software, which sounds like a nice idea, but with two out of those three companies in bad shape, do Mitsubishi and Nissan really have the resources to help, from a manpower perspective? Feels more like a precursor to a takeover, not a merger.
The electric car as savior?
You might read that Honda is interested in Nissan’s electric car expertise, and that might be true. Nissan was an early adapter with its LEAF. But Honda’s a smarter, bigger company, and this comes down to actual resources.
With Nissan absorbed, it’s one less Japanese company to fight for the precious metals needed to make batteries for cars, and in fact allows access to whatever resources Nissan does have for production, including factories all over the world.
Electric cars still aren’t turning a profit, and companies have been rolling back electrifying their entire lineups. Without gas models to provide the funds to develop new technology, the business plan can’t function.
A Nissan-Honda merger would force overlapping lineups
In 2022, Honda sold 154,612 Accords, compared to 139,955 Nissan Altimas. Surprised at how close they are?
It’s a symptom of a larger issue here – they sell to the same market. So does Mitsubishi (perhaps slightly downmarket), and so do the combination of Infiniti and Acura. If Honda did this, would it even see the need to keep Nissan around?
Examples in the past point to one company buying another in a market it’s not currently in. BMW went smaller and cheaper with MINI. Ford purchased Jaguar and Aston Martin. And Renault purchased a large stake in Nissan. In each of these instances, the company that took over intended to use the acquisition’s name and products. Usually from different countries too.
What’s Honda supposed to do with Nissan’s product portfolio? Altima and Accord even sound the same.
What makes this time different?
History repeats itself. In 1999 Nissan was in financial trouble, and they turned to Renault with Carlos Ghosn for help.
Initially it worked – by 2005, Nissan’s entire lineup was revamped and the brand sold well. In 2013, the Renault–Nissan Alliance sold one in ten cars worldwide, and became the world’s fourth largest automaker.
What happened in the proceeding decade points to severe cost-cutting and cheap solutions, such as Nissan feeling good about itself for selling to rental companies while everyone else pulled back from that market. Rent-a-Wreck isn’t exactly good for the brand image.
In the end, Ghosn was arrested, and Renault reduced its stake in Nissan by 30%, no longer being financially tied together. Since then, multiple CEOs have left (some even stealing), and Nissan has been without a rudder.
China’s Market
I suppose it’s difficult to shake the stigma of poor quality products from China, but I don’t think that’s fair as time passes and the things they make become more complex. While the US imposes heavy tariffs on cars built in China, the rest of the world has no such limits. And one of Nissan’s biggest markets is China – it’s even larger than the US for them.
China’s EV market is big – they don’t have the history of ICE production that legacy companies have, so they have nothing to hold them back in terms of heritage. Think Honda wants Nissan’s foothold in the Chinese EV market?
Can a Nissan-Honda merger work?
Like Infiniti, Nissan is soon coming to the point where they must take a big risk on product development. Either their current upcoming generation (they are planning to update 78% of its US lineup by 2026) will make an impact, or it will be more of the same. Honda isn’t going to save the day with an infusion of money.
For the kid that sat in the back seat of a Maxima and drove Z cars, I hope they make it. But the adult I am remains skeptical.
