By Moses Akaigwe

 

The memorandum of understanding (MoU) on a merger announced recently by Nissan and Honda, which is expected to be finalised by June 2025, is attracting more than a cursory attention from the auto world for, at least, two major reasons.

The MoU by the two Japanese auto giants (which also involves Mitsubishi) aims to incorporate a world class company producing around eight million vehicles annually, and record sales revenue exceeding 30 trillion yen and operating profit of more than 3 trillion yen.

 

This will position them as a formidable competitor to global heavyweights such as Toyota Motor Corp. and Volkswagen AG. 

According to the Economist and AP, Nissan’s expertise in batteries and EV technology, combined with Honda’s robust research and development capabilities, could accelerate advancements in EVs and autonomous driving. 

Additionally, Nissan’s lineup of large SUVs like the Armada and Infiniti QX80 could fill gaps in Honda’s portfolio, while Honda’s financial stability could support Nissan’s ongoing recovery from financial and reputational setbacks, according to AP. 

The announcement on Monday, December 23, 2024 said Nissan and Honda had signed an MOU to start discussions and considerations toward a business integration between the two companies through the establishment of a joint holding company.

To further accelerate their efforts toward achieving a carbon-neutral society and a zero-traffic-fatality society, Nissan and Honda signed an MOU on March 15 regarding a strategic partnership for the era of vehicle intelligence and electrification. Since then, the two companies have held discussions aimed at collaboration in various fields.

On August 1, both companies signed a further MOU to deepen the framework of the strategic partnership. The companies also announced that they had agreed to carry out joint research in fundamental technologies in the area of platforms for next-generation software-defined vehicles (SDVs), particularly in the areas crucial for intelligence and electrification, to advance focused discussions toward more concrete collaboration.

Throughout the process, Nissan and Honda have engaged in discussions in consideration of various possibilities and options.

At the same time, the business environment for both companies and the wider automotive industry has rapidly changed and the speed of technological innovation has continued to accelerate.

The MOU is aimed to serve as an option to maintain global competitiveness and for the two companies to continue to deliver more attractive products and services to customers worldwide.

If the business integration can be realised, both companies can aim to integrate their respective management resources such as knowledge, human resources, and technologies; create deeper synergies; enhance the ability to respond to market changes; and expect to improve mid- to long-term corporate value.

Additionally, Nissan and Honda can aim to further contribute to the development of Japan’s industrial base as a “leading global mobility company” by integrating Nissan and Honda’s four-wheel-vehicle and Honda’s motorcycle and power products businesses, enabling the brands of both companies to become more attractive and to deliver more attractive and innovative products and services to customers worldwide.

Marking the announcement, Nissan Director, President, CEO and Representative Executive Officer Makoto Uchida said: “Today marks a pivotal moment as we begin discussions on business integration that has the potential to shape our future.

“If realised, I believe that by uniting the strengths of both companies, we can deliver unparalleled value to customers worldwide who appreciate our respective brands. Together, we can create a unique way for them to enjoy cars that neither company could achieve alone.”

Honda Director and Representative Executive Officer Toshihiro Mibe said: “Creation of new mobility value by bringing together the resources including knowledge, talents, and technologies that Honda and Nissan have been developing over the long years is essential to overcome challenging environmental shifts that the auto industry is facing. 

“Honda and Nissan are two companies with distinctive strengths.  We are still at the stage of starting our review, and we have not decided on a business integration yet, but in order to find a direction for the possibility of business integration by the end of January 2025, we strive to be the one and only leading company that creates new mobility value through chemical reaction that can only be driven through synthesis of the two teams.”

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Potential synergies from the business integration 

 

Nissan and Honda will establish an integration preparatory committee to facilitate a smooth integration and will conduct focused discussions.

Based on the committee’s discussions, as well as the results of due diligence, the companies will examine and analyze more specific synergies. By promptly realizing the synergies from the integration, Nissan and Honda can aim to become a world-class mobility company with sales revenue exceeding 30 trillion yen and operating profit of more than 3 trillion yen.

The expected synergies from the business integration at this time are: 

Scale advantages by standardizing vehicle platforms; and enhancement of development capabilities and cost synergies through the integration of R&D functions.

Parts of the advantages are Optimizing manufacturing systems and facilities; and strengthening competitive advantages across the supply chain through the integration of purchasing functions 

Others are realising cost synergies through operational efficiency improvements; and cquisition of scale advantages through integration in sales finance functions 

The business integration is also expected to lead to the establishment of a talent foundation for intelligence and electrification; and impact on method of business integration and stock listing.

Nissan and Honda, with the result of the consideration, plan to establish, through a joint share transfer, a joint holding company that will be the parent company of both companies.

This will be subject to approval at each company’s general meeting of shareholders and obtaining necessary approvals from relevant authorities for this business integration, based on the premise that Nissan’s turnaround  actions are steadily executed.

Both Nissan and Honda will be fully owned subsidiaries of the joint holding company.

Additionally, the companies plan to continue coexisting and developing the brands held by Honda and Nissan equally.

When the MoU comes to fruition, it will be interesting to see how the emerging company will be represented in the Nigerian market, with Nissan and Honda currently operating through Stallion Motors (Nissan, Stallion Motors Nigeria Limited, NMN Ltd), and Honda Automobile Western Africa Limited (HAWA), respectively.

Stallion Motors is also involved in the marketing and sales of Honda in Nigeria, partnering with HAWA (which owns an assembly plant in Ota, Ogun State), to provide the vehicles in the local market.