Honda and Nissan Collaborate to Challenge the Chinese Car Market

Honda and Nissan are planning a merger to compete with China’s growing dominance in the car industry. This move could create one of the world’s largest car manufacturers, alongside Toyota, Volkswagen, General Motors, and Ford. The deal, potentially worth billions, is driven by the need to counter the “rise of Chinese power” in the global automotive market, according to Honda’s CEO Toshihiro Mibe. He emphasized the importance of having a strategy in place by 2030 to avoid being outpaced by competitors.

The merger would include Mitsubishi, in which Nissan is the largest shareholder, allowing the three companies to pool resources to better compete against electric vehicle (EV) manufacturers like Tesla. Chinese-made electric vehicles, such as those from BYD, have increasingly dominated the global EV market, posing a threat to established car brands.

The shift in the industry is partly due to lower labor and manufacturing costs in China, allowing local firms to price their cars more competitively. This has helped China become the world’s largest producer of electric vehicles. In response, the European Union has imposed higher tariffs on Chinese-made EVs to counteract what it views as unfair subsidies from the Chinese state.

Nissan and Honda’s combined sales exceed $191 billion, and the two companies have been exploring a strategic partnership in the EV space since March. The CEOs of both firms emphasized the need to strengthen their capabilities to face emerging global competitors by 2030, or risk falling behind.

While the merger could help Nissan recover from recent struggles, including declining sales and a planned reduction of 9,000 jobs, it is not seen as a bailout. Nissan has been trying to regain stability after the arrest of former CEO Carlos Ghosn, whose financial misconduct charges led him to flee Japan in 2019. Ghosn, currently in Lebanon, has criticized the merger plans, calling them an act of panic.

Any merger would depend on Nissan’s recovery, and the deal is likely to face significant political scrutiny in Japan due to potential job cuts. Additionally, Nissan is expected to end its long-standing alliance with French automaker Renault.