December 19, 2024

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Nissan Motor CEO Makoto Uchida (left) and Honda Motor CEO Toshihiro Mibe pose for a photo during a press conference in March this year. (Honda, Nissan)

The reported merger plan between Japanese auto brands -- Honda and Nissan -- is set to increase competition for Hyundai Motor Group amid an unpredictable outlook brought on by geopolitical uncertainties.

According to news reports Wednesday, Honda and Nissan began discussing a plan to establish a joint holding company as they look to better grapple with the fast-changing electric vehicle industry and bolster their competitiveness against EV leaders such as America’s Tesla and China’s BYD.

Neither Honda nor Nissan confirmed the reports, saying that they will inform their stakeholders at an appropriate time if there are any updates.

The latest merger talks followed up the two automakers’ memorandum of understanding in March this year that they would begin a feasibility study of a strategic partnership in vehicle electrification and intelligence. In August, Mitsubishi Motors, in which Nissan is a majority stakeholder with a 24 percent share, joined the alliance to create more synergies and new business opportunities.

As of Wednesday’s market capitalization, the combined auto giant formed by Honda and Nissan would be worth $52 billion and oust Hyundai Motor from the No. 3 spot, behind Toyota and Volkswagen.

As Honda and Nissan sold about 4.2 million and 3.4 million vehicles worldwide, respectively, in 2023, Hyundai Motor’s 7.3 million sales volume would also be overtaken.

The merged entity would increase competition for the Korean auto conglomerate’s three brands -- Hyundai Motor, Kia and Genesis -- especially in the United States, which Hyundai Motor has emphasized in its aims to expand its global market share.

According to automotive sales data analysis Goodcarbadcar, Hyundai Motor Group sold 425,814 units in the US in the third quarter of this year while Honda and Nissan sold 366,214 and 206,057 units, respectively, during the same period.

Hyundai Motor Group Executive Chair Chung Euisun delivers his New Year's address at Kia AutoLand Gwangmyeong in Gyeonggi Province on Jan. 3. (Hyundai Motor Group)

“Even if (Honda and Nissan) merge, that does not mean Hyundai Motor’s revenue or sales volume will decrease,” said Lee Ho-geun, an automotive engineering professor at Daeduk University.

“Once Nissan and Honda co-work, they are going to share various infrastructures such as dealer networks and research and development, which will save them fixed costs and investment. In this way, they will be able to secure cost-competitiveness and enhanced quality by efficiently allocating their limited resources.”

Although it may not be a big problem at the moment, Lee added that the combined forces of Japanese auto brands have given Hyundai and Kia a concern in the long term.

An industry official noted that a Honda-Nissan merger was likely to shake up the auto landscape.

“But not everything is a concern,” said the official. “As the auto industry is an economy of scale, the bigger the scale gets, the more production increases. So (the merger between Honda and Nissan) could lead to positive competition.”

Kim Pil-su, an automotive engineering professor at Daelim University, pointed out that Nissan has an alliance with Renault, meaning that Nissan has laid the groundwork for global expansion.

“In Honda’s case, they are a technology-oriented company,” he said. “So Honda and Nissan can create various synergies in many areas unlike how Stellantis group is not doing so well. (The merger between Honda and Nissan) is not a pretty picture for Hyundai and Kia. How the Japanese automakers will work together will matter but it’s going to have an impact on Hyundai’s position on the global stage.”

Another industry official underscored that the Japanese automakers’ merger is a global trend in the automotive sector.

“Even big, traditional auto powerhouses are seeking ways to join forces against the rising competitors from China and restrain Tesla’s EV dominance in the world,” said the official. “Honda and Nissan are trying to survive and their partnership will make the sector grow and accelerate the EV transition, which has not lived up to expectations.”

Hyundai Motor Group announced in Sept. that Executive Chair Chung Euisun met with General Motors CEO Marry Barra in New York and agreed to explore future collaboration in vehicle development, supply chain and clean energy technology. Chung also met with Akio Toyoda, chairman of Toyota, at racing events in Korea and Japan in October and November, respectively, and said they are discussing collaboration.

By Kan Hyeong-woo (hwkan@heraldcorp.com)