Japanese government figures this year sought to bring Nissan and Honda together for merger talks, as a sign of growing concerns in Tokyo about the future of the country’s once powerful auto sector.
The proposal to create a national champion was first made to companies at the tail end of 2019, according to three people familiar with the matter, thanks to fears that Japan’s large car factory base will lose its advantage if the shift to self-driving electric cars created greater competition.
The independent future of Honda, the country’s third-largest carmaker with annual sales of 4.8m cars, has come under special scrutiny in recent years as consolidation has accelerated elsewhere.
But the ambitious project faltered before it even began, after both sides immediately rejected the idea and the plan was buried in the chaos caused by Covid-19.
Rising demand for electric cars and other expenditures of technology has put pill everywhere under pressure to bulge through mergers or alliances, even before the pandemic plunged the sector into crisis.
Peugeot owner PSA is merging with Fiat Chrysler in a deal announced for the outbreak, while Ford and Volkswagen formed a global alliance last year to save costs.
Ultimately, mergers in the sector often do not go unnoticed when rival engineering teams clash over whose technology is better, and trusted corporate cultures fail to gel, as during the disastrous Daimler-Chrysler tie-up.
Japan still has eight major car brands, but four of them – Mazda, Subaru, Suzuki and Daihatsu – are bound by cross-shareholdings with Toyota, the second largest carmaker in the world. Meanwhile, Nissan has a troubled three-way alliance with France’s Renault and smaller rival Mitsubishi Motors, leaving Honda as the only group without a capital bond.
The idea to combine Nissan with Honda appears to have originated from the protectionist instincts of advisers to Prime Minister Shinzo Abe. Those advisers, people familiar with the situation said, were worried that the state of Nissan’s alliance with Renault had been so bad since the arrest in 2018 of its former boss Carlos Ghosn that it could somehow collapse. , and exposed the Japanese company.
But Honda officials have backed down against the idea, pointing to Nissan’s complex main structure with Renault, said one person who was close to the talks. Nissan was opposed to the idea because the group is focusing on getting its existing alliance on track, said another person close to the company’s board. The merger idea evaporated soon before it reached the boards of both companies.
Nissan, Honda and the Prime Minister’s cabinet declined to comment.
Carmakers fall under the supervision of the Ministry of Economy, Trade and Industry, but government officials have ruled out the ministry being actively involved in bringing the two groups together.
Drivers in the auto industry point to other structural factors when excluding a Nissan-Honda alliance.
“A Nissan-Honda merger would only make sense for people who do not understand the auto industry,” said one former Nissan executive.
The main obstacle is Honda’s unique technical design for its cars, which would make it very difficult to use common parts and platforms with Nissan and its partners. Without that, the alliance would not be able to reap the cost savings that come with larger scale.
While the two companies are similar in size when it comes to the number of cars they sell each year, their business model is fundamentally different. Honda makes more profit from motorcycles than cars, making it better able to emulate than Nissan. The group is also the largest manufacturer of engines in the world and its products include private jets, lawn mowers and boat engines.
In terms of technology, the two companies have pursued separate strategies, with Nissan pioneering technology for electric cars, while Honda, like Toyota, has traditionally invested heavily in hydrogen cars.
In the field of self-driving cars, Renault and Nissan have partnered with Waymo to develop autonomous transport services in Paris and Japan, while Honda has invested in Cruise, General Motors’ unit for autonomous cars.
Additional reporting by Peter Campbell in London
