Honda/Nissan merger scrapped, Taiwanese Foxconn lurking

Honda Motor Co. and Nissan Motor Co. are set to scrap their plan to merge into what would have become the world’s third-biggest auto group by volume as negotiations collapsed less than two months after its announcement. Meanwhile, Chinese Foxconn is lurking around the corner, not to take over Nissan but to cooperate with them.

Honda and Nissan, Japan’s second and third largest automakers, said in December that they hoped to conclude negotiations in June 2025 and establish a holding company in 2026 under which the two brands would operate. After holding board meetings, the two companies are scheduled to release their earnings results for the April-December period later today.

The two carmakers had sought to cut costs by sharing the growing financial burden of developing electric vehicles and software to better compete with global rivals such as U.S. Tesla Inc. and China’s BYD Co.

When they revealed their plan to begin merger talks at a press conference in December, Honda said struggling Nissan would need to boost its turnaround efforts as a condition for the deal. In November, Nissan said it would cut 9,000 jobs worldwide and reduce its global production capacity by 20 percent.

Six thousand five hundred of them are supposed to be factory personnel in three different factories. Nissan only refers to a plant in Thailand, but persistent rumors say that the company isn’t ruling out its big Sunderland plant in the UK for closure, in whole or in part.

However, sources familiar with the matter have said Nissan’s plans failed to convince Honda that the slumping carmaker is on track for a successful turnaround. Honda recently proposed making Nissan its subsidiary, fearing that slow progress in the automaker’s revamp could jeopardize the merger’s future path.

The move, however, riled Nissan’s board and caused it to tilt toward scrapping the plan, according to the sources. Honda and Nissan initially said they would unveil the details of their tie-up plan by the end of January but pushed it back to mid-February.

Foxconn

Already at the end of last year, persistent rumors circulated that the Taiwanese contract manufacturer Foxconn was interested in collaborating with Nissan. These rumors accelerated the talks between Honda and Nissan, which were also encouraged by the Japanese government, which wanted to keep the number two and three car manufacturers entirely Japanese.

Foxconn boss Young Liu publicly confirmed for the first time on Wednesday that the world’s largest contract manufacturer is interested in joining Nissan. However, he emphasized that he wants to cooperate with Nissan, not take it over.

Foxconn is specifically looking into buying the Nissan shares that Renault wants to sell. However, according to Foxconn CEO Young Liu, that is only one of the options currently being discussed. “Our aim is cooperation,” he added. The option would be considered if a partnership is only possible by joining Nissan.

Foxconn is increasingly moving from contract manufacturing in the consumer electronics sector, such as iPhones, into electric car production. The Taiwanese company has developed its own EV platform and introduced its own car brand, Foxtron.

Jun Seki, head of strategy at Foxconn’s electric vehicle division, was a top manager at Nissan until the end of 2019. He is now said to want to take advantage of his former employer’s situation.

Nissan in trouble

Nissan is currently often referred to as a restructuring case. Over the years, the Japanese company’s sales have fallen to just over three million vehicles, almost too small in the mass market to operate profitably with its own technologies and platforms.

On the other hand, the 25-year alliance with Renault is apparently diluting. Although Renault is an essential shareholder in Nissan, the French company wants to reduce its shares to 15% (from 43%) to finance its own investments in electric mobility and software-defined vehicles.

Sebastien Amichi, a Kearney associate and automotive analyst, said in the French magazine La Tribune: “Nissan’s results are problematic. Without a fundamental restructuring, the situation will become precarious within twelve to eighteen months.”

That’s why Honda suddenly became the dominating partner in the negotiations with Nissan and proposed taking over Nissan as a subsidiary instead of having a fusion between equals. The reason is simple: when Nissan is really going down, it wouldn’t harm Honda as it would have with a fusion.

Other solutions?

Although the Japanese government is still pushing both Japanese manufacturers to agree, the chances are high that it won’t work. Although both companies are mainly addressing the same market segments, their strategies differ strongly.

Nissan, for example, isn’t happy about Honda’s interest in hydrogen, and the latter is cautious about Nissan putting all its eggs in the electric basket. However, Honda’s position could change if the Japanese government is ready to help Nissan financially.

Another scenario is the collaboration between Nissan and another foreign manufacturer. This could be a Chinese one, but according to certain rumors, the North American manufacturers are in the running, especially GM and Ford, as Stellantis has other fish to fry. According to Sebastien Amichi, this makes sense “because Nissan is by far the most ‘American’ manufacturer of the Japanese.”

The role of Renault in this will remain interesting. Until now, the French carmaker has been Nissan’s biggest shareholder, with ±36% of all shares currently. It wants to validate this in the future by reducing its share to 15% and selling the other shares as high as possible.

On the other hand, it wants Nissan to remain an active partner in Ampere, so Renault has every interest in helping Nissan overcome its troubles. It can certainly do that by multiplying economic and technical partnerships.