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

Honda’s imaginable merger pinch Nissan would correspond 1 of the largest shake-ups to the manufacture since the creation of Stellantis successful 2021. But location are huge risks involved, too.

On Tuesday successful Las Vegas, during a roundtable chat pinch prime media, Honda executives offered immoderate much penetration into the merger, including really combining resources and factories could thief the companies enactment competitory successful the progressively costly conflict pinch China.

Honda is concerned astir China’s meteoric emergence arsenic a ascendant and highly competitory subordinate successful the EV and autonomous driving space. In precocious December, erstwhile Honda and Nissan announced that they had signed a memorandum of knowing to create an automotive institution worthy astir $50 billion, Honda CEO Toshihiro Mibe said that the “rise of Chinese automakers and caller players has changed the car manufacture rather a lot... We person to build up capabilities to conflict pinch them by 2030, different we’ll beryllium beaten.”

The stakes are high, too. According to a caller study by S&P Global Mobility, the world EV marketplace will turn astir 30 percent twelvemonth complete year, pinch 89.6 cardinal caller EVs expected to beryllium sold this year. According to Allied Market Research, the world autonomous conveyance marketplace is expected to scope astir $60.3 cardinal successful 2025 and is projected to scope $448.6 cardinal by 2035. If the Japanese automakers want to proceed to predominate the marketplace arsenic they person since the 1960s, they person to iterate quickly and get products into consumers’ hands. 

“Since the opening of past year, we’ve been successful speech pinch Nissan,” Noriya Kaihara, head and executive vice president astatine Honda, said done a translator pursuing the company’s debut of 2 “production prototypes,” the Honda 0 Saloon and the Honda 0 SUV astatine CES. “Nothing has been decided but we’ve been discussing really to proceed.” 

Honda wants Nissan’s ample SUVs and underutilized factories

During the roundtable, Kaihara said that Honda is looking astatine Nissan arsenic a measurement to trim costs astir early software-defined vehicles (SDV). 

“We person important labour and improvement costs, and if location are operations we could share, that would beryllium bully for us,” he said. Developing brand-new software, he continued, including precocious driving systems that move person to autonomous vehicles and battery-electric vehicles, is some progressively important for the longevity of established automakers and progressively expensive.  

Honda besides said that Nissan’s ample SUVs for illustration the Armada and Pathfinder make it an charismatic partner. Toshihiro Akiwa, VP and caput of Honda’s BEV improvement center, said done a translator that Honda’s hybrid exertion is coagulated but only presently exists successful its midsize vehicles for illustration the CR-V and the Accord. The institution is willing successful Nissan’s larger vehicles because Honda’s “motor and artillery capacity tin beryllium adapted to the larger vehicle.”

While Honda does person the Prologue, that conveyance was portion of a $5 cardinal associated task pinch GM that only lasted done the improvement of 2 vehicles. The Prologue has been a astonishment EV hit, trading complete 33,000 successful 2024 and outselling the larger gas-powered Honda Passport.

Since the business pinch GM went south, it’s not apt that the Prologue will beryllium successful accumulation long, though Honda has made nary announcements astir its plans for the vehicle. Honda does not presently connection an all-electric crossover extracurricular of the Prologue, though fans of the marque person been asking for an all-electric CR-V for years. 

Nissan, connected the different hand, saw its earnings diminution by arsenic overmuch arsenic 90 percent past year, forcing it to laic disconnected thousands of employees. The institution has been struggling since the apprehension of erstwhile Nissan CEO Carlos Ghosn successful 2018 for financial misconduct. Unsurprisingly, Ghosn isn’t pleased astir the news, telling Bloomberg that Nissan was successful “panic mode,” calling the deal a “desperate move” and noting that the “synergies betwixt the 2 companies are difficult to find.”

But arsenic Honda executives astatine the roundtable noted, Nissan’s struggle could airs an opportunity for Honda, too. That’s because Honda plants that service the US are presently moving astatine maximum capacity, and they could usage the excess capacity astatine Nissan’s factories to meet customer demand. “I’m not successful a position to make remark [on Nissan], but they person capacity,” Kaihara said.

Trump’s tariff threats and nonaccomplishment of EV incentives

President-elect Donald Trump’s threats to enforce tariffs connected overseas imports and destruct national subsidies that person helped prevention Americans billions successful EV costs besides came up successful the conversation. “If Trump impacts early authorities strategy we person to beryllium very elastic erstwhile the subsidies are trim aliases stopped,” Kaihara said. 

That includes wherever Honda builds and produces its astir celebrated vehicles for illustration the CR-V and Civic. “Each mill successful Canada and Mexico is almost to afloat accumulation level,” Kaihara said. “It’s not truthful easy to alteration that direction, but depending connected the tariff situation, we mightiness person to alteration the accumulation location to Japan aliases location else.” 

A important move for illustration that would beryllium costly and could construe to accrued prices for consumers erstwhile they spell to bargain their adjacent Honda.  

In spite of each this, Honda is not wavering connected its committedness to electrification. “For the clip being, we will person caller EVs successful the adjacent twelvemonth for the Zero series,” Kaihara said. “For the agelong term, I think, considering the biology issues, EVs will beryllium the solution for the future, and that will not beryllium changed.”