January 16, 2025 - The ongoing merger talks between Honda and Nissan have taken a new turn, as Honda has reportedly asked Nissan if it would consider buying back the 35.7% stake in Nissan held by French automaker Renault. This inquiry comes at a critical moment in the merger negotiations, as both automakers aim to strengthen their position in the increasingly competitive global automotive market.
Renault currently owns 35.7% of Nissan, which is valued at approximately ¥557 billion (roughly $3.6 billion USD). Honda is concerned that if Renault's stake is acquired by a third party, it could introduce uncertainty into the merger process, and has thus requested that Nissan consider repurchasing these shares to ensure the deal proceeds smoothly. However, neither Honda nor Nissan has publicly commented on these reports.
Honda and Nissan officially began merger discussions in December 2024. Industry analysts believe this move is aimed at enhancing the two companies' competitiveness, especially in the electric vehicle (EV) sector. Prior to the merger talks, rumors circulated that Foxconn was interested in acquiring a stake in Nissan, potentially leveraging Nissan's manufacturing capabilities to bolster Foxconn's entry into the electric vehicle market. This rumor reportedly accelerated the merger discussions between Honda and Nissan.
The two companies plan to announce the framework of the deal by the end of January 2025 and intend to establish a new holding company by August 2026, which will be listed on the Tokyo Stock Exchange. Should the merger proceed, it would significantly reshape the Japanese automotive market, potentially leading to a two-tier competition between Honda-Nissan and other major players.
However, Nissan currently faces severe financial challenges. As of December 2024, Nissan's market capitalization had fallen to approximately ¥1.56 trillion, with cash and cash equivalents totaling around ¥1.52 trillion, which may be insufficient for a buyback of Renault's shares. To address its financial issues, Nissan has announced plans to cut 9,000 jobs globally and reduce production capacity by 20%. In the first half of the 2024 fiscal year (April to September), Nissan's operating profit plummeted by 90.2%, and its net profit dropped by 93.5%. For the full 2024 fiscal year (April 2024 to March 2025), Nissan now expects its operating profit to fall to ¥150 billion, a 70% reduction from previous projections. The company has also lowered its revenue forecast by more than 9%, signaling almost no growth in revenue compared to the previous year.
Against this financial backdrop, whether Nissan has the financial capability to buy back Renault's stake remains a crucial question. While the merger could bring potential synergies and cost savings, overcoming Nissan's current financial struggles will be a significant challenge for both Honda and Nissan to navigate.
The stance of Renault regarding the sale of its shares in Nissan also remains uncertain. Whether Renault will agree to sell and under what conditions will have a significant impact on the merger process.
In summary, while the merger between Honda and Nissan has the potential to reshape the automotive landscape, the deal faces numerous challenges, including financial difficulties, the issue of Renault's stake, and external market risks. Overcoming these obstacles will be crucial for both companies to successfully finalize their merger.
