Why Honda is merging with Nissan: factories, SUVs, and China

Honda’s attainable merger with Nissan would constitute probably the most greatest shake-ups to the trade for the reason that introduction of Stellantis in 2021. However there are huge risks concerned, too.

On Tuesday in Las Vegas, all over a roundtable dialogue with choose media, Honda executives presented some extra perception into the merger, together with how combining sources and factories may assist the corporations keep aggressive within the more and more pricey battle with China.

Honda is keen on China’s meteoric upward push as a dominant and extremely aggressive participant within the EV and self reliant riding area. In overdue December, when Honda and Nissan introduced that that they had signed a memorandum of understanding to create an automotive company worth around $50 billion, Honda CEO Toshihiro Mibe said that the “upward push of Chinese language automakers and new gamers has modified the automobile trade reasonably so much… We need to building up functions to battle with them by way of 2030, another way we’ll be overwhelmed.”

The stakes are top, too. In step with a contemporary document by way of S&P Global Mobility, the worldwide EV marketplace will develop just about 30 p.c 12 months over 12 months, with 89.6 million new EVs anticipated to be offered this 12 months. In step with Allied Market Research, the worldwide self reliant car marketplace is predicted to achieve round $60.3 billion in 2025 and is projected to achieve $448.6 billion by way of 2035. If the Eastern automakers need to proceed to dominate the marketplace as they have got for the reason that Nineteen Sixties, they have got to iterate briefly and get merchandise into shoppers’ fingers. 

“For the reason that starting of remaining 12 months, we’ve been in dialog with Nissan,” Noriya Kaihara, director and government vice chairman at Honda, stated thru a translator following the corporate’s debut of 2 “production prototypes,” the Honda 0 Saloon and the Honda 0 SUV at CES. “Not anything has been made up our minds however we’ve been discussing tips on how to continue.” 

All over the roundtable, Kaihara stated that Honda is taking a look at Nissan so that you can cut back prices round long term software-defined automobiles (SDV). 

“We now have vital hard work and building prices, and if there are operations shall we proportion, that may be excellent for us,” he stated. Creating brand-new application, he persevered, together with complex riding techniques that transfer nearer to self reliant automobiles and battery-electric automobiles, is each more and more essential for the longevity of established automakers and more and more pricey.  

Honda additionally stated that Nissan’s huge SUVs just like the Armada and Pathfinder make it a phenomenal spouse. Toshihiro Akiwa, VP and head of Honda’s BEV building middle, stated thru a translator that Honda’s hybrid era is forged however handiest recently exists in its midsize automobiles just like the CR-V and the Accord. The corporate is concerned about Nissan’s better automobiles as a result of Honda’s “motor and battery capability can also be tailored to the bigger car.”

Whilst Honda does have the Prologue, that car used to be a part of a $5 billion joint venture with GM that handiest lasted throughout the building of 2 automobiles. The Prologue has been a surprise EV hit, promoting over 33,000 in 2024 and outselling the bigger gas-powered Honda Passport.

Since the partnership with GM went south, it’s not really that the Prologue will likely be in manufacturing lengthy, regardless that Honda has made no bulletins about its plans for the car. Honda does now not recently be offering an all-electric crossover outdoor of the Prologue, regardless that lovers of the logo had been soliciting for an all-electric CR-V for years. 

Nissan, however, noticed its earnings decline by as much as 90 percent last year, forcing it to put off hundreds of workers. The corporate has been suffering for the reason that arrest of former Nissan CEO Carlos Ghosn in 2018 for monetary misconduct. Unsurprisingly, Ghosn isn’t happy concerning the information, telling Bloomberg that Nissan used to be in “panic mode,” calling the deal a “determined transfer” and noting that the “synergies between the 2 firms are tough to search out.”

However as Honda executives on the roundtable famous, Nissan’s fight may pose a possibility for Honda, too. That’s as a result of Honda crops that serve the USA are recently operating at most capability, they usually may use the surplus capability at Nissan’s factories to satisfy buyer call for. “I’m now not ready to make remark [on Nissan], however they have got capability,” Kaihara stated.

President-elect Donald Trump’s threats to impose price lists on overseas imports and do away with federal subsidies that experience helped save Americans billions in EV costs also came up within the dialog. “If Trump affects long term executive technique we should be very versatile when the subsidies are minimize or stopped,” Kaihara stated. 

That incorporates the place Honda builds and produces its hottest automobiles just like the CR-V and Civic. “Each and every manufacturing facility in Canada and Mexico is nearly to complete manufacturing degree,” Kaihara stated. “It’s now not really easy to switch that course, however relying at the tariff state of affairs, we would possibly have to switch the manufacturing location to Japan or in different places.” 

An important transfer like that may be pricey and may translate to higher costs for shoppers after they pass to shop for their subsequent Honda.  

Despite all this, Honda isn’t wavering on its dedication to electrification. “In the meanwhile, we will be able to have new EVs within the subsequent 12 months for the 0 collection,” Kaihara stated. “For the long run, I believe, taking into consideration the environmental problems, EVs would be the answer for the long run, and that may not be modified.”