A deal between Honda and Nissan would have created one of the world’s biggest carmakers, giving the combined company the scale it needs to compete wit
…
- A deal between Honda and Nissan would have created one of the world’s biggest carmakers, giving the combined company the scale it needs to compete with EV makers.
The likely fallout of Honda Motor Co.’s short-lived alliance with Nissan Motor Co. spells trouble for both companies, but probably one more than the other.
Nissan, which has struggled for years with revolving-door leadership and an outdated product lineup, may have doomed itself if it ultimately rejects Honda’s attempted takeover. And while Honda may have dodged a bullet by not taking on its weaker rival, it isn’t out of the woods either — it’s lagging behind in the global shift to electric vehicles, which has seen Chinese upstarts like BYD Co. power ahead.
A deal would have created one of the world’s biggest carmakers, giving the combined company the scale it needs to compete with EV makers. Left on their own, Honda and Nissan are languishing in eighth and ninth place when ranked by global sales, and are in danger of being overtaken by China’s Geely Automobile Holdings Ltd., whose sprawling empire includes brands like Zeekr, Volvo and Lotus.
When Honda and Nissan report third-quarter earnings Thursday — delayed by a week as the companies tried to thrash out the deal — the results should indicate how they might fare post-breakup.
Honda is forecast to report operating income of ¥407 billion ($2.7 billion) in the three months ended on Dec. 31, according to the average of estimates compiled by Bloomberg. In contrast, Nissan is seen posting an operating income of only ¥51.5 billion.
For the fiscal year ending March 31, Honda’s operating income is forecast to reach ¥1.45 trillion, while Nissan’s is seen at just ¥130 billion, well short of its November guidance of ¥150 billion, which itself was a huge downgrade from its initial projection of ¥500 billion.
The concern is that Nissan will be too optimistic, said Julie Boote, an automotive analyst at London-based research firm Pelham Smithers Associates. While gas-electric hybrids have caught a second wind in the US and EVs are running ahead in China, Nissan has fallen behind on both fronts.
The maker of Pathfinder SUVs and Altima sedans said in November that it would cut 9,000 jobs, slash production capacity by a fifth and lower its annual profit forecast by 70%. Its plans to reduce costs without closing any factories were met with scepticism, and Nissan is rushing to come up with a deeper restructuring plan in time for the earnings release on Thursday.
“Where is sales growth going to come from?” Boote said. “They might be quite optimistic because they have to prove that they can generate enough income to increase profits after the restructuring.”
As if to illustrate the point, reports of Nissan rejecting Honda’s advances last week surfaced just hours before Toyota Motor Corp. — the world’s top-selling automaker for the past five years — raised its annual profit outlook.
When Honda and Nissan announced the tie-up in December, it was clear that it wouldn’t be a marriage of equals. With a market value more than five times greater than Nissan, and more than eight times the operating income last quarter, Honda’s advantage was self-evident.
Still, that doesn’t mean it’s immune to growing competition in the global auto industry either.
Japanese carmakers are losing ground to BYD as the Chinese EV giant finds inroads into key markets in Southeast Asia and even starts to build a foothold on their home turf.
Honda could report growth in quarterly profit after weak sales in China, Southeast Asia and Japan were buoyed by US shipments and its highly profitable motorcycle business, according to Bloomberg Intelligence senior auto analyst Tatsuo Yoshida.
Nissan, meanwhile, could see a large downward revision if restructuring costs are folded in this quarter.
Get insights into Upcoming Cars In India, Electric Vehicles, Upcoming Bikes in India and cutting-edge technology transforming the automotive landscape.
First Published Date: 10 Feb 2025, 07:16 AM IST