ADVERTISEMENT

Maybe a Nissan-Honda Tieup Isn’t So Unthinkable After All

Maybe a Nissan-Honda Tieup Isn’t So Unthinkable After All

(Bloomberg) -- A Nissan Motor Co. alliance with Honda Motor Co. “feels a little wrong” but shouldn’t be out of the question if the embattled automaker ends up severing ties with Renault SA, according to LightStream Research analyst Mio Kato.

Such a tie-up could appeal given the threat of Toyota Motor Corp., which has brought many smaller Japanese automakers like Mazda Motor Corp., Suzuki Motor Corp. and Subaru Corp. into its fold, Kato wrote in a note available on SmartKarma.

“Honda has never been one to engage in aggressive M&A and a merger between Honda and Nissan should be unthinkable, but with Toyota’s increasing competitiveness we feel that if Nissan desired an alliance partner to replace Renault, Honda may not be entirely against the idea,” Kato said.

Nissan denied reports earlier this week that it was considering ending its alliance with Renault, which has been shaken by the dramatic escape of former Chairman Carlos Ghosn from trial in Japan. It referred to the Renault alliance as a “source of Nissan’s competitiveness.”

Nissan declined to comment on the report in SmartKarma and referred queries to its previous statements about its alliance with Renault. A representative for Honda said no steps, such as a capital alliance or merger, were under consideration.

Read More:
The Tokyo Job: Inside Carlos Ghosn’s Escape to Beirut
Renault-Nissan Alliance ‘Not Negotiable,’ Morgan Stanley Says
Bail Releases Were Climbing in Japan Before Carlos Ghosn Escaped

Kato said carmakers will be inclined to seek partnerships given their investment burden over the new few years. He suggested that the auto industry in Japan could ultimately be split into two giant groups.

Replacing Renault with Honda in the alliance would raise unit volumes to about 12 million units a year from under 11 million units and improve product mix, given that Honda produces larger vehicles than Renault, according to Kato.

“Nissan does have attractive possibilities to dangle in front of potential suitors and Toyota’s relentless march forward could necessitate drastic change for those on the outside in Japan,” he wrote.

To contact the reporters on this story: Min Jeong Lee in Tokyo at mlee754@bloomberg.net;Tsuyoshi Inajima in Tokyo at tinajima@bloomberg.net

To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, ;Young-Sam Cho at ycho2@bloomberg.net, Will Davies

©2020 Bloomberg L.P.