The news sent shockwaves across the auto industry, Wall Street and even the consumer space: Struggling Japanese automaker Nissan may merge with considerably less struggling Japanese automaker Honda. If you own, have owned or are a fan of either brand, this may come as a total surprise to you, and that's understandable. But I'm about to fill you in on why this might be happening and what it means for the entire car business as a whole.
That's the lead item on this midweek edition of Critical Materials, our morning news roundup. Make sure you subscribe to our newsletter in the link below and check out the Plugged-In Podcast from InsideEVs, with new episodes dropping on audio platforms and YouTube on Fridays.
Also on tap today: some good news on the EV charging front, even with President Donald Trump coming in with a vendetta against electric funding. Let's dig in.
30%: A Honda-Nissan Merger Could Save Japan Inc. From Disaster, Or Fix Nothing
I've actually been inundated with text messages about this news from my normal friends and family members—you know, people who don't fastidiously read automotive trade publications, Bloomberg and the Financial Times multiple times a day. "Wait, Nissan and Honda?" they ask. "What's wrong with Nissan? Or Honda?"
That's because most people don't understand the rough shape that Nissan, specifically, is in these days. It's just kind of one of those normal, everyday car brands that people buy when they don't want to think that much about buying a car, or its specs, or how it looks—they need something new and they need a good deal. But that's the problem. That's what that brand has become in the U.S., its biggest and most important global market.
What people don't realize is that Nissan's sales and profits here and worldwide have been tanking for years now. Dealer profits in the U.S. are down 70% year-over-year. Operating profit plunged by 99% in its first financial quarter. Sales have been sliding even worse in China, where homegrown car brands have been displacing the Western and other Asian ones at a rapid pace for years now.
The cars may offer decent deals, but they aren't competitive in terms of technology. Nissan sells no hybrid cars in the U.S. at a time when they're having a huge moment. (The opposite is true for Toyota, for example, which is having a great year thanks to hybrids.) And despite being an early mover in the EV space, Nissan only sells the outdated Leaf and the so-so Ariya, while it's delayed a slew of other models; it doesn't have the momentum that, say, General Motors or Hyundai have in the electric realm.
You can blame this on a lot of things, but one of the biggest culprits is the fallout from two crises: the fall of its former megaboss Carlos Ghosn and the talent drain that happened afterward, followed by the yearslong renegotiation of Nissan's often-awkward alliance with Renault. All that chaos didn't leave Nissan very prepared for the future, and its outdated technology and lineup of cars is catching up to it now.
“The announced merger talks between Nissan and Honda are not surprising, given the recent turbulence impacting legacy automakers globally," said Michael Brisson, auto economist at Moody’s Analytics, in an email to InsideEVs. "Nissan's financial struggles are in no small part a consequence of the surging competition from Chinese automakers. Their 2023 retail sales in China were roughly half of their 2019 figures, a year when China accounted for one in three of Nissan's global sales."
"These Nissan-Honda merger discussions, coupled with the recent challenges at Stellantis and production cutbacks in Europe, all point to a single, stark reality: a new force has emerged in the automotive sector, and legacy automakers need to be acutely aware of the competitive threat," Brisson said.
So, yes. Things are worse at Nissan than your average person probably knows. Now, where does Honda enter into this?
Like the rest of Japan Inc., Honda is behind on fully electric cars (which is a longer story, but here's a good summary of why.) But Honda's cars still sell well. It makes hybrids people like. It's profitable. And Honda really seems to have gotten a wake-up call from the rise of China's automakers, so while it's late to the game, it's orchestrating a big EV push that we'll see the fruits of in the coming years.
To get ahead of the EV powerhouse that is China, these automakers need money, expertise and scale. These are huge investments. They require tons of capital to develop batteries and software, and own the supply chains to develop both. This isn't a game of who makes the best internal-combustion engines anymore. It's a totally different game. And Japan Inc. can either catch up or die, probably at the hands of China's BYD and others.
In response, we've seen Japan's auto industry coalesce around two factions: one led by Toyota that includes Mazda, Subaru and Daihatsu, and another with Honda and Nissan and probably Mitsubishi. Honda and Nissan announced a technical partnership earlier this year to co-develop EVs and software. Now, it could turn into a full-blown merger instead.
Nikkei Asia first reported the news yesterday and it's been featured in countless other outlets, so I do think it has legs. The theory is the two would operate under a holding company that could also eventually include Mitsubishi.
I also think Honda was sparked into action—perhaps even by the Japanese government—over reports that a Chinese automaker or other firm could acquire some or all of Nissan. In theory, that could give one of those companies a way into the U.S. or a better path to Europe through Nissan's dealer networks. Obviously, Japan doesn't want that.
Now the question is, will it actually happen? Here's CNBC with some analysis I like:
The merger report comes at a time when many auto giants are struggling to cope with increased global competition from bigger electric vehicle (EV), makers such as Tesla and China’s BYD.
A mega-merger, however, is expected to face several obstacles. Analysts have expressed concerns about the likelihood of political scrutiny in Japan, given the potential for job cuts if a deal pushes through, while the unwinding of Nissan’s alliance with French vehicle manufacturer Renault is regarded as pivotal to the process.
“This tie-up is not entirely unexpected because obviously they announced their partnership earlier this year,” Lucinda Guthrie, executive editor at Mergermarket, told CNBC’s “Street Signs Europe” on Wednesday.
“Some of the reports I’ve seen claim that this came about as a result of Foxconn making an approach to Nissan. Now, with this particular transaction, I question whether it is going to be a hardcore merger or whether it is going to be more of a partnership,” she added.
Make no mistake: Honda is the savior here. Or would be, if this goes through. One analyst told CNBC that the deal "would likely have a negative impact for Honda, but a positive one for Nissan and Mitsubishi."
But whatever's going to happen will likely take years. The renegotiation of Nissan's situationship with Renault certainly did, and remember that automaker is part-owned by the French government. And here's the thing: if it does work, these companies have more capital to play with, but also a bigger organization, very different internal cultures and challenges around which brand should be doing what.
If this is a survival play for either company—but especially Nissan—success is far from guaranteed.
60%: U.S. EV Charging Investments To Continue, Even Under Trump
But it's not all doom and gloom in the EV space. Everyone who watches it closely has been fearful of Trump's threats to axe the EV tax credits, which would almost certainly dampen sales and derail the electric transition the Biden administration was pushing so hard for. Yet one thing that could hurt EV growth even more is if funding for public fast chargers were to dry up as well.
Automotive News reports today that thankfully, that isn't very likely. Why? Because much of that money has already been doled out to states, which then distribute it to various companies that then build the chargers:
“It would take almost an act of God for Trump or Congress to overturn” the National Electric Vehicle Infrastructure program, said Loren McDonald, chief analyst at Paren, which recently acquired McDonald’s EV Adoption firm.
That’s because much of the $5 billion that underpins the initiative has already been doled out to the states. The remainder was preapproved. Policymakers designed the five-year program, which started in 2021, to help states create a network of public charging stations in 50-mile intervals along interstates.
Eleven states have opened more than 30 charging sites with more than 130 ports, backed by the federal funds, according to Paren.
States receive the funding and manage their own EV infrastructure programs that comply with federal requirements, like they do with roads and bridges.
They have received nearly half — about $2.4 billion — of the EV charging program’s funds, according to Atlas Public Policy. The full $5 billion was already approved as part of the Bipartisan Infrastructure Law.
“Congress really doesn’t need to do anything for the program to continue,” said Nick Nigro, founder of Atlas Public Policy. “A lot of funding is going out the door. A lot of construction is underway, and I expect that to continue for the foreseeable future.”
That's promising. But we'll find out more in January.
90%: More GM Energy Stations Coming, From ChargePoint
Here's a great example. General Motors and ChargePoint announced today that they are "are accelerating the deployment of DC fast charging across the U.S. through an incentive program," and that will yield 500 ultra-fast charging ports open by the end of 2025.
From a news release:
Many of the new locations will be equipped with ChargePoint’s Omni Port system, which allows vehicles with CCS or NACS charging ports to use any charger, without the need to carry an adapter or dedicate a parking space to a particular connector type. Many of the new locations will feature ultra-fast charging through ChargePoint’s Express Plus platform, capable of charging speeds up to 500kW.
Get excited to see a lot more of those soon.
100%: Honda-Nissan: What's Your Read?
Will this potential merger allow both Japanese automakers to thrive in the future, or is it too little, too late? And would these two even be good partners with one another? Let us know what you think in the comments.
Contact the author: patrick.george@insideevs.com
