Japanese initiative wants Tesla to invest in Nissan

Following the failed merger talks between Nissan and Honda, a Japanese initiative hopes that Tesla will invest in Nissan. However, it’s not very clear what the long-term benefits for Tesla could be, and Elon Musk seems reluctant.

According to a report in the Financial Times, a Japanese advisory group led by former Tesla board member Hiro Mizuno wants to convince Elon Musk to invest in the company. The group believes that Tesla could be interested in taking over Nissan’s plants in the U.S. Former Japanese Prime Minister Yoshihide Suga also supports the plan and has put his top collaborator Hiroto Izumi on the job.

Investor consortium

The plans are relatively concrete. The Japanese group is planning an investor consortium for Nissan, with Tesla being the largest financial backer. A Tesla investment could prevent Nissan from being completely overwhelmed by Foxconn, the Taiwanese giant showing interest in Nissan.

The report states that other activist and private equity groups are also said to be ‘circling around’. The Japanese group fears the carmaker “could fall into potentially hostile foreign hands” if the struggling company were to focus strictly on returns. Tesla taking over U.S. plants would then be the lesser of evils.

According to the Financial Times, several Nissan board members know about the initiative. The consortium of investors led by Tesla is supposed to leave room for a minority investment by Foxconn. Only the latter’s majority takeover would be prevented.

Now that the merger with Honda is officially off the table, Nissan is urgently looking for new partners. Alliance partner Renault seems not interested and is already diminishing its stake in Nissan, as decided when the Alliance was restructured. Nissan did not comment on the information about the Japanese initiative.

Nissan has also been downgraded by Moody’s. The rating agency revised its credit rating for Nissan from Baa3 to Ba1, a decision isntigated by “the weak profitability of Nissan due to lower demand for its portfolio of aging cars”.

Overcapacity in the U.S.

Nissan has two assembly plants in Tennessee and Mississippi with a total capacity of around one million vehicles per year, and the production of electric cars over there is planned. However, only 525,000 vehicles were built last year, meaning the factories only operate at around half capacity.

Nissan has already decided to reduce the number of shifts at both plants. Tesla already has electric car plants in California and Texas and builds all vehicles sold in the U.S. there. The company’s plant for the electric Semi truck in Nevada is still under construction.

Hurdles to take

However, the Japanese initiative’s plan has some flaws. Although Nissan factory capacity utilization at the plants in the U.S. is low, the US market is crucial for Nissan in terms of sales and turnover. Nissan could thus not want to sell plants to another car manufacturer.

Secondly, Tesla would have to be interested in taking over the Nissan plants, which are currently still primarily focused on combustion engines. In its annual report for 2024, the Californian EV maker emphasized that it would first use new production methods to increase the capacity of its existing plants to around three million vehicles (from the current 2.35 million units) before investing in new production lines.

And the ‘big boss’ seems also to be indirectly declining. With regard to the ‘unboxing’ production strategy, which is set to debut in 2026 with the Cybercab in Texas, Musk wrote on X: “The Tesla factory IS the product. The Cybercab production line is like nothing else in the automotive industry.” Taking over genuine ICE plants does not fit into that program.

Furthermore, it’s not so sure Tesla wants to risk a ‘Japanese adventure’. Tesla has no history of strategic investments in competitors, and its strategic focus seems to be shifting to autonomous cars and robotics. Nevertheless, there seem to be investors who estimate the investment plans to be realistic. Nissan shares went more than 9% higher on the Tokyo stock market yesterday.