Honda and Nissan are the latest automakers to discuss combining forces. They won’t be the last. The two Japanese automakers announced last week that they plan to merge and create the world’s third largest automaker. Details aren’t yet finalized, but they expect to announce the combination within six months. Mergers in the auto industry are nothing new. They have taken place since the acquisition of various brands formed General Motors (GM) in the first decade of the 20th century.
But experts say the Honda-Nissan deal could help to spark a string of combinations that could soon reshape the industry “I think the environment is there for additional mergers,” said Jeff Schuster, global vice president of automotive research for GlobalData. “I don’t think Honda-Nissan will cause more deals to take place, although it could accelerate them.” The factors driving possible deals, from technological change and the industry’s huge appetite for R&D and capital spending to thin profit margins, are numerous and powerful. The push toward consolidation is only going to get greater in coming decade. And it could be that only the biggest survive. “It gets more challenging to survive and not have economies of scale if everyone else does, especially as you move into new technology,” he said. “When you’re in a highly competitive market, it tends to create partners that might not have happened otherwise.” New technology, billions in costs The change from gasoline-powered cars to electric vehicles and self-driving technology, has already cost automakers tens of billions of dollars in research and development costs, and it will need tens of billions of dollars, if not hundreds of billions across the industry, more. The push to switch to EVs has been partly driven by environmental regulations that will make depending on profits from internal combustion engines more risky in the future, and partially driven by investor demand for stock valuations that match Tesl