During a recent roundtable event in Las Vegas, Honda executives provided further details about the merger, highlighting how the integration of resources and manufacturing facilities could enhance their competitiveness amid the escalating challenges posed by China.
Honda is particularly wary of China's rapid emergence as a formidable force in the electric vehicle (EV) and autonomous driving sectors. In late December, when Honda and Nissan announced their memorandum of understanding to form a new automotive entity valued at approximately $50 billion, Honda CEO Toshihiro Mibe remarked that the "rise of Chinese automakers and new entrants has significantly altered the automotive landscape... We must enhance our capabilities to compete with them by 2030, or we risk being outpaced."
The implications are considerable. A recent report from S&P Global Mobility indicates that the global EV market is projected to expand by nearly 30 percent year over year, with an estimated 89.6 million new EVs expected to be sold this year.
Additionally, Allied Market Research forecasts that the global autonomous vehicle market will reach around $60.3 billion by 2025, with projections soaring to $448.6 billion by 2035. For Japanese automakers to maintain their market dominance, which they have held since the 1960s, they must innovate rapidly and deliver products to consumers without delay.
“Since the beginning of last year, we’ve been in conversation with Nissan,” Noriya Kaihara, director and executive vice president at Honda, said through a translator following the company’s debut of two “production prototypes,” the Honda 0 Saloon and the Honda 0 SUV at CES. “Nothing has been decided but we’ve been discussing how to proceed.”
Honda is interested in acquiring Nissan's large SUVs and underused manufacturing facilities.
At the roundtable discussion, Kaihara mentioned that Honda views Nissan as a potential partner to help lower expenses associated with the development of future software-defined vehicles (SDV).
There are considerable labor and development expenses involved, and he noted that sharing certain operations would be beneficial for the company. He emphasized that creating entirely new software, particularly for advanced driving systems that edge closer to autonomous capabilities and battery-electric vehicles, is becoming increasingly vital for the sustainability of traditional automakers, while also escalating in cost.
Honda also highlighted that Nissan’s substantial SUVs, such as the Armada and Pathfinder, present a compelling partnership opportunity. Toshihiro Akiwa, Vice President and head of Honda’s BEV development center, conveyed through a translator that while Honda’s hybrid technology is robust, it is currently limited to its midsize models like the CR-V and Accord. The company is keen on Nissan’s larger vehicles, as Honda’s “motor and battery capacity can be adapted to the larger vehicle.”
Honda's Prologue, developed through a $5 billion collaboration with GM, was initially intended for just two vehicles. However, it has unexpectedly become a successful electric vehicle, with sales exceeding 33,000 units in 2024, surpassing those of the larger gasoline-powered Honda Passport.
Given the deterioration of the partnership with GM, the future production of the Prologue remains uncertain, although Honda has not disclosed any specific plans regarding the vehicle. Currently, the Prologue is Honda's sole all-electric crossover, despite ongoing requests from brand enthusiasts for an all-electric version of the CR-V.
In contrast, Nissan experienced a dramatic 90 percent drop in earnings last year, leading to significant layoffs. The company has faced challenges since the 2018 arrest of former CEO Carlos Ghosn for financial misconduct. Ghosn expressed his dissatisfaction with the situation, describing Nissan as being in "panic mode" and labeling the recent deal as a "desperate move," while also highlighting the difficulties in finding synergies between the two companies.
However, Honda executives at a recent roundtable suggested that Nissan's difficulties could present an opportunity for Honda. With Honda's U.S. plants operating at full capacity, they could potentially utilize the surplus capacity at Nissan's facilities to satisfy customer demand. “I’m not in a position to make comment [on Nissan], but they have capacity,” Kaihara said.
Trump's tariff threats and the potential loss of EV incentives
The discussion also touched on President-elect Donald Trump’s potential imposition of tariffs on foreign imports and the elimination of federal subsidies that have significantly reduced costs for American consumers purchasing electric vehicles (EVs). “If Trump alters future government policies, we must remain adaptable in the event that subsidies are reduced or eliminated,” stated Kaihara.
This adaptability extends to the locations where Honda manufactures its most popular models, such as the CR-V and Civic. “Our factories in Canada and Mexico are nearing full production capacity,” Kaihara noted. “Shifting production is not a straightforward process, but depending on the tariff landscape, we may need to consider relocating production to Japan or another site.”
Such a significant change would incur substantial costs and could lead to higher prices for consumers when they seek to purchase their next Honda.
Despite these challenges, Honda remains steadfast in its commitment to electrification. “For the time being, we will have new EVs in the next year for the Zero series,” Kaihara said. “For the long term, I think, considering the environmental issues, EVs will be the solution for the future, and that will not be changed.”