Written in conjunction with - Chinua Onyia: LLB Law, UCL
In December 2024, Nissan and Honda announced a merger that would create the world's third-largest carmaker by sales, just behind Europe’s Volkswagen and their Asian competitors, Toyota. This merger has also sparked an interest from Nissan’s alliance partner, Mitsubishi. This new titan would make a total of 8 million cars yearly. The deal comes at a time where the industry is continuously changing with higher regulations and increased government demands to reach net zero.
What implications arise on the US front?
The merger positions them to compete in a volatile auto industry, particularly against Tesla and BYD, amid growing uncertainty as Trump returns to the presidency.
Trump's administration is dismantling Biden's electric vehicle (EV) policies, starting with the revocation of the 2021 executive order that aimed for 50% EV sales in new US vehicles by 2030. This signals broader changes ahead, as Trump plans to roll back clean-energy initiatives in favor of US oil production. He has also announced 25% tariffs on Canadian and Mexican imports, which could take effect as early as February 1st.
The merger strengthens both carmakers' ability to navigate these industry challenges. It helps shield them from tariff impacts, especially Nissan with its large Mexican manufacturing base. Though both companies plan to expand EV production and US market share, the lenient EV regulations may give them valuable time to develop their technologies.
However, major challenges lie ahead. At their joint press conference, Honda's CEO emphasised that this merger is not a financial rescue of Nissan, making it clear that Nissan's financial stability is crucial for the deal. Nissan must carefully navigate the new US policy landscape. The US market remains vital for both companies, with Honda drawing a third of its vehicle sales from the US and Nissan 27%. Given Nissan's falling US sales and both companies' current technological standing, Honda and Nissan will be facing significant challenges in the near future.
How does the merger impact the UK?
Since the announcement of the October budget, the merger will see a total headcount of 360,000 worldwide. But since the budget there is also much uncertainty. National insurance and corporation taxes have risen and do not seem like they will be dropping any time soon. The UK government has tried to entice large manufacturers through tax incentives. However, companies are inevitably going to look to cut costs in the form of labour, facility upkeep and overall manufacturing costs. This begs the question of how this merger will look in the eyes of the UK public?
Though Honda halted all car production in the UK in 2021, it is set to return at Nissan’s Sunderland car making plant, with 6,000 employees. This plant is the largest in the UK operating at half-capacity. However, Nissan announced in November last year that it would be cutting 9,000 jobs as a result of a huge drop in sales. Moreover, competing automobile manufacturers have been cutting jobs heavily in the last months. Stellantis have announced the closure of its Luton plant, placing 1,100 jobs at risk, and Ford is set to cut 800 jobs in the UK. Therefore, the general consensus is that UK employees are fearing job security.
However, there are lots of positives to consider. This merger comes a year after Nissan announced up to £2 billion of new investment into its electric vehicle production in the UK. The public itself should also expect lower prices for future models, as the merger between the Japanese powerhouses should see more efficient production in terms of costs. This merger could also facilitate the entrance of other Chinese EV manufacturers, which could revive many jobs.
Looking ahead
Nissan’s shares have risen drastically by a reported 20 per cent and the merger is already confirmed to be backed by Nissan’s biggest shareholder, Renault. The merger is set to take place in 2026, but Honda hopes to complete an agreement by June this year.
Nonetheless, the way ahead remains unclear, with Nissan and Honda poised to deal with significant challenges in both the US and the UK. Trump’s policies, however, may better position the carmakers to handle the US market if approached strategically. However, with an already diminished presence in the UK and rising taxes, the further expansion of Nissan-Honda into the UK market seems extremely unlikely.
References and Further Reading:
“Consolidate to survive: what the Nissan-Honda merger talks mean for Japan Inc” (Financial Times)
“Trump revokes Biden 50% EV target, freezes unspent charging funds” (Reuters)
“How Nissan and Honda stack up against each other” (Reuters)
”Here are two seismic changes pushing Honda and Nissan into merger talks” (NPR)
“£40 billion plan revealed to merge Sunderland Nissan and Honda” (The Northern Echo)
“Honda and Nissan merger talks spark UK job fears” (CityAM)
“Honda and Nissan to start talks on potential mega-merger” (The Guardian)
“Nissan decision throws future of Sunderland car factory into doubt as Stellantis looks to axe Luton jobs” (GB News)
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