Honda, Nissan, and Mitsubishi eye potential USD 58 bn merger amid rising EV competition

The single biggest story on Planet Finance is the possible merger of automobile giants Honda and Nissan, after the two companies inked an MoU in a bid to create the world’s third-largest automaker by sales, according to a statement yesterday.

Is Mitsubishi in? The talks, which could also include Mitsubishi Motors, who is set to decide whether to formally join the merger talks next month, according to a separate MoU, are set to finalize by June 2025, with a holding company established by 2026. The transaction would bring the combined valuation of Honda and Nissan to USD 54 bn according to their current market caps, and to USD 58 bn if Mitsubishi were included. This would put them only behind Toyota and Volkswagen in terms of size, the Financial Times reports. The two companies would aim for combined sales of JPY 30 tn yen (USD 191 bn) and operating profit of more than JPY 3 tn yen.

The automakers say it is a competitive play: The merger is part of a broader strategy to maintain competitiveness amid “drastically changing business dynamics,” Honda CEO Toshihiro Mibe said, with Chinese EV makers and Tesla rapidly gaining traction against the Japanese automotive sector. “We have to build up capabilities to fight with them by 2030, otherwise we’ll be beaten,” Mibe said. The need for scale represents a forward-looking strategy and is “not a rescue of Nissan,” Mibe added.

What’s the issue with Nissan? The Japanese automaker recently announced a 20% cut in global production capacity and plans to slash 9k jobs following a 90% drop in operating profit in the first half of the fiscal year. According to Reuters, Nissan’s weakened financial position has raised speculation that the merger is a lifeline, despite denials from both CEOs.

The challenge? Creating meaningful synergies and avoiding past merger pitfalls, such as DaimlerChrysler’s failed union, the New York Times said. The FT and Reuters forecast that the merger could face hurdles — including resistance from shareholders and regulatory approvals — on the back of Nissan’s weaker financial footing amid profitability concerns and declining sales in its largest market, China.

Honda and Nissan plan to share platforms and resources to cut costs, focusing on EVs, autonomous driving technologies, and software development. However, its scale still may fall short of providing a competitive edge against Tesla and Chinese automakers, lauded for their cost-efficient production and technological advancements, the NY Times reports.

Market reax: Honda’s shares climbed up 13.4% on the news, benefiting from a separate share buyback announcement, while Nissan shares fell 7% on the Tokyo Stock Exchange, and Mitsubishi Motors gained 0.3%.

ALSO WORTH KNOWING ON PLANET FINANCE-

• South Korea is set to issue its first KRW-denominated foreign-exchange stabilization bonds in over two decades next month, targeting up to KRW 20 tn (USD 13.8 bn) in total debt issuance for 2025 to reduce KRW funding costs and boost currency market stability, according to a Finance Ministry source with knowledge of the matter. (Bloomberg)
• Global bond funds attracted a record USD 600 bn in inflows this year, despite closing the year down 1.7%, according to Bloomberg’s global aggregate bond index, amid concerns about slower-than-expected rate cuts in 4Q. Investor demand was driven by elevated yields and slowing inflation, alongside an anticipated easing of monetary policy. (Financial Times)

MARKETS THIS MORNING-

Asian markets are mixed, with South Korea’s Kospi and Japan’s Nikkei both slipping 0.3%, after the Bank of Japan published minutes from its latest monetary policy meeting. Meanwhile, Hong Kong’s Hang Seng index rose 0.4% on open, while mainland China’s CSI 300 gained 0.1%. Over on Wall Street, futures are near the flatline ahead of an early day for the New York Stock Exchange for Christmas Eve.

THE CLOSING BELL: TADAWUL-

The TASI rose 0.8% yesterday on turnover of SAR 4.9 bn. The index is down -0.2% YTD.

In the green: Zamil Industries (+4.3%), Saudi Re (+4.2%) and MedGulf (+4.2%).

In the red: NCLE (-3.9%), Aldrees (-3.8%) and Riyadh Cement (-3.6%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.9% yesterday on turnover of SAR 53 mn. The index is up 26.2% YTD.

In the green: Enma Alrawabi (+7.7%), Ghida AlSultan (+7.6%) and Dar AlMarkabah (+5.2%).

In the red: View (-13.8%), Keir (-6.7%) and Nofoth (-5.6%)