The Japanese government is reportedly postponing the plan of merging Nissan and Honda, Japan’s second and third largest automakers respectively.
The Government had proposed the merger of the two automakers at the end of 2019, according to three sources familiar with the matter. However, the auto giants rejected the proposal and due to the spread of the COVID-19 pandemic, the discussion was blurred.
This decision was made in response to the judgment that as the auto industry is moving towards the self-driving electric vehicles (EVs), Japanese automakers are losing their competitiveness.
The ministry of economy, trade, and industry supervisions the automobile industry, but the government officials have eliminated the ministry’s active participation in teaming up the two groups.
One of the obstacles is reported to be the complicated relationship shared between Honda and Nissan. The other difficulty is the complexity of Honda’s exceptional engineering design synchronizing with Nissan's production platform. If the production platform of these two companies fails to integrate, the cost reduction motive of the merger will vanish.
Even though the two companies are similar in size, their business model is very different when it comes to the number of cars sold each year. Honda sells more motorcycles than cars which helps it to tackle downturns better than Nissan.
Also, in terms of technology, both companies have different strategies. On one hand, Nissan is the pioneer of electric technology whereas Honda has traditionally invested in hydrogen-powered cars.
Of the 8 biggest automakers in Japan, Subaru, Suzuki, Mazda, and Daihatsu share ownership with Toyota, Japan’s top automaker. Nissan also has a partnership with Renault and Mitsubishi Motors in France. Honda is the only company that does not have any capital affiliation. It is reported that, with the auto industry becoming more active, Honda is seriously considering mergers with other firms.