Consultants’ feedback on talks between Honda and Nissan to deepen ties

(Reuters) -Honda and Nissan (OTC:NSANY) are in talks to deepen ties, two individuals stated on Wednesday, together with a doable merger, the clearest signal but of how Japan’s as soon as seemingly unbeatable auto business is being reshaped by challenges from Tesla (NASDAQ:TSLA) and Chinese language rivals.

Listed below are feedback from specialists:

KOJI ENDO, SENIOR ANALYST AND HEAD OF EQUITY RESEARCH, SBI SECURITIES, TOKYO:

“If Honda (NYSE:HMC)’s hybrid automobiles are equipped to Nissan and Mitsubishi Motors (OTC:MMTOF) and if they’ll promote them, the three firms would all be higher off since that might broaden the gross sales channel.

“The holding firm scheme, moderately than a merger, seems to be the important thing as they’ll minimise the dangers whereas taking the advantages of integration.

“The query now’s what’s going to occur to Renault (EPA:RENA)’s 15% stake in Nissan. Renault might fully half methods with Nissan by means of promoting the shares.”

SANSHIRO FUKAO, EXECUTIVE FELLOW, ITOCHU RESEARCH INSTITUTE, TOKYO:

“This deal seems to be extra about bailing out Nissan, however Honda itself shouldn’t be resting on its laurels. Honda’s money stream is ready to deteriorate subsequent 12 months and its EVs haven’t been going so nicely. Honda itself wants to vary drastically. It could must spin off its bike enterprise and it ought to set up a stable monetary base from engine automobiles. If these are made simpler by a establishing a holding firm (with Nissan), then that might be a constructive factor for Honda.

“If their considering is not more than ‘we are able to handle this by getting collectively,’ I don’t assume they’ll survive any longer. The velocity of Chinese language automakers is completely totally different. We’re not within the age the place carmakers would be part of collectively, churn out income by means of economies of scale after which reinvest them in a five-year restructuring plan. They don’t have any time for that.”

TANG JIN, SENIOR PRINCIPAL RESEARCHER, MIZUHO BANK, TOKYO:

“Honda has a singular, technology-centric tradition with strengths in powertrains, so there must be some inner resistance to the merger with Nissan, a competitor with a special tradition that’s now faltering.

“Honda itself doesn’t have such plentiful administration sources. It faces a significant problem of the way it can speed up its shift to electrification by earning profits from hybrids and bikes. Nissan, then again, has no selection.

“The automotive business is presently present process fast modifications … so if the 2 firms can not make choices and execute them in unison and at velocity, they might not be capable of sustain with the modifications.”

SEIJI SUGIURA, SENIOR ANALYST, TOKAI TOKYO INTELLIGENCE LABORATORY, TOKYO:

“Honda’s inner opinion might be break up and never monolithically supportive of the merger. As a result of their bike enterprise is doing nicely. For the four-wheelers, they actually have issues, however they weren’t in dire straits both.

“Within the mid- to long-term, that is good for the Japanese automotive business because it creates a second axis in opposition to Toyota (NYSE:TM). Constructive rivalry with Toyota is a constructive for the moderately stagnating Japanese automotive business when it should compete with Chinese language automakers, Tesla and others.”