Nissan’s mooted merger with Honda may be best answer to industry’s EV problem

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Potential deal sounds more like a credible plan for crisis-hit carmaker as its troubled alliance with Renault hits a dead end

out of a global workforce of 130,000. Production capacity was cut by 20%. There was some muttering about seeking a new anchor investor because the troubled 25-year alliance with Renault of France was heading up a dead end. None of it appeared to be a sufficiently radical response to a self-described “severe situation” and a plunge in Nissan’s stock market value to a clapped-out $8bn ., which should probably be viewed as a takeover given that the would-be partner is worth four times as much.

The need for radicalism can be explained in a word: China. The relentless rise of Chinese electric carmakers, with BYD to the fore, has ripped through the global auto industry, as even Germany’s once-mighty names can testify.wasn’t left entirely in the EV blocks, since it used to have the pioneering Leaf, but it failed to follow that early success or foresee the popularity of hybrids.

Japan can console itself that it still has Toyota, the world leader in car production and a beneficiary of the hybrid trend in the US. But a Honda-Nissan combo would be a vivid demonstration of how the country’s auto industry has been outmuscled by Chinese state subsidies in the era of EVs. China dominates supply chains in batteries – even those going into Nissan’s well-performing site in Sunderland in the UK.

It is unclear how the Renault arrangements could be cleanly unpicked – there is a 15% cross-shareholding plus the French own extra in Nissan via a trust. But the appetite for the alliance has faded on both sides ever since Carlos Ghosn, the chair of both companies,. Already Honda and Nissan have been shuffling closer together by, for example, signing a partnership in components and software earlier this year. A merger would be a bigger shove in the same direction.

It would also fit with how others are seeking shelter from the Chinese-inspired EV storm, plus the complicating threat of tariffs under the Trump administration in the US. “This is another sign of what we believe is much-needed consolidation and/or industry capital efficiency to remain competitive in a rapidly changing industry,” said UBS’s analysts.

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