Honda and Nissan join forces to take on China in cars

Key Points

• Honda and Nissan to merge to create one of the world's largest car producers.
• The merger aims to combat competition from Chinese car makers, specifically in the growing electric vehicle market.
• Nissan has been struggling with falling sales, especially in China and the US, and the merger is not intended as a bailout.

Detailed Summary

• Honda's chief executive, Toshihiro Mibe, stated that the merger is a necessary response to "the rise of Chinese power" and the changing automobile industry.
• Chinese-made electric vehicles, such as those from BYD, have become a significant threat to established car makers.
• China has become the world's largest producer of electric vehicles due to lower labor and manufacturing costs.
• The merger would allow Honda, Nissan, and Mitsubishi (in which Nissan is the largest shareholder) to share resources and develop more competitive electric vehicles.
• Honda and Nissan have already agreed to cooperate in their EV businesses and work together on battery technology.
• The deal is likely to face political scrutiny in Japan due to potential job cuts, and Nissan may need to unwind its alliance with Renault.

Conclusions

• The merger between Honda and Nissan is a strategic move to address the growing competition from Chinese car makers, particularly in the electric vehicle market.
• The combined resources and expertise of the three companies aim to enhance their competitiveness and "fight back" against the "rise of Chinese power."
• The deal highlights the challenges faced by traditional car manufacturers in the face of changing industry dynamics and the rise of electric vehicles.