When giants merge

Last month, Japanese automobile majors Honda Motor Company and Nissan Motor Corporation announced their plans to merge. The strategic move, which includes establishing a joint holding company, is aimed at enhancing their competitiveness in the electric vehicle (EV) market and countering the dominance of Tesla and the Chinese rivals.

The proposed joint venture would potentially create the world’s third-largest automaker by sales after Toyota and the Volkswagen group. In Japan, this merged entity will be the second-largest player and is likely to give competition to Toyota Motor Corporation. Honda and Nissan aim to complete the deal by August 2026.

The two companies had signed a memorandum of understanding on December 23 to start discussions for business integration. Mitsubishi Motors, which has been a part of the Renault-Nissan alliance so far, is expected to join by the month-end. According to insiders, Honda will initially lead the new management, retaining the principles and brands of each company.

Earlier, on August 1, both companies had announced to carry out joint research in fundamental technologies in platforms for next-generation software-defined vehicles (SDVs). Prior to this, on March 15, they agreed to a strategic partnership for vehicle intelligence and electrification.

The MoU between Nissan and Honda is set to serve as an option to maintain global competitiveness in new energy vehicles and to deliver more attractive products and services worldwide.

This is not the first time that Japanese automakers have formed a joint venture. In 2019, Toyota and Suzuki had joined hands to achieve synergies through product and platform sharing. However, compared to the Toyota-Suzuki alliance, which has produced cross-badged models, this collaboration will develop models that are distinct and cater to different segments while sharing a common platform, say experts.

Honda & Nissan in India

In India, the top six auto-makers — Maruti Suzuki, Hyundai, Tata Motors, Toyota, Kia and Mahindra & Mahindra — accounted for 92.6 per cent of the domestic sales in FY24. Honda Cars India tasted some success with its City, but struggled because of fewer models. In the last fiscal, Honda saw a sales drop of over 5 per cent in the domestic market and touched a market share of just over 2 per cent. The company sold 86,584 units in FY24 compared to 91,418 units in FY23. Among its models are Amaze, City and Elevate. From April to November last year, the domestic sales plummeted by 28 per cent.

Nissan, which had talked about hitting a market share of 5 per cent in 2020, went in the negative in FY24, with sales plummeting by 10 per cent. Its market share came down to less than 1 per cent. The company sold 30,146 units in FY24 compared to 33,611 units in FY23. Nissan once had a joint venture with Ashok Leyland which was called off around 2016. It operates in India through a manufacturing joint venture with its global alliance partner Renault.

The alliance in India is estimated to have an installed capacity of 4 lakh units at the Oragadam factory outside Chennai. Both Nissan and Renault have scored limited success in India.

Past collaborations

JSW-MG Motor JV: In March last year, the $23 billion JSW Group and SAIC Motor, which owns and operates the MG Motor brand, formally announced their joint venture to produce both electric and internal combustion engine (ICE) passenger vehicles for Indian as well as export markets. This was the first major India-China joint venture in the passenger car industry.

Toyota Kirloskar Motor: It is a joint venture between Toyota Motor Corporation, Japan, and the Kirloskar Group for the manufacture and sale of Toyota cars in India. TKM’s first plant was established in 1997 and production started in 1999. Toyota has 89 per cent stake, while Kirloskar Systems Ltd has 11 per cent stake.

Renault-Nissan JV: The Renault-Nissan Alliance was set up in 2008 as Renault Nissan Automotive India Private Limited (RNAIPL), a 70:30 joint venture, with Nissan holding the majority stake. It began manufacturing operations in 2010 at a new plant in Tamil Nadu. Under the new framework agreement, RNAIPL will move to an ownership of 51 per cent for Nissan and 49 per cent for Renault.

Maruti Suzuki India Ltd: It was on October 2, 1982, that the Government of India and Suzuki of Japan signed a joint venture agreement and set up Maruti Udyog Ltd (formerly). Maruti was majorly owned by the Indian government, leaving Suzuki with a 26 per cent stake. The government gradually reduced its stake before exiting the business in 2003, by making it a public company. It sold all of its remaining stake to Suzuki Motor Corporation in 2007.

Honda Cars India Ltd: Honda Cars India Ltd is a 100 per cent subsidiary of Honda Motor Company Ltd, Japan. The company was established in 1995 as a joint venture, namely Honda Siel Cars India, in partnership with Usha International. After a 16-year partnership, in 2012, Honda acquired the stake of Usha to become a 100 per cent subsidiary of Honda Motor Co, Japan.

Other partnerships: Mahindra & Mahindra is working with German Volkswagen group for components on electrics. Two-wheeler maker Bajaj has partnered with KTM for churning out powerful bikes. TVS Motor has a partnership with German BMW Motorrad for making 310cc motorcycles. Harley-Davidson has decided to come back in partnership with Hero MotoCorp.

In the offing: After withdrawing twice, Ford Motor Company is betting on India for the third time. In September, Ford said it planned to restart work at the Chennai plant to make cars that are initially aimed for exports. Ford is reportedly considering entering into a joint venture. Earlier, Ford had refused to sell the Chennai factory to Sajjan Jindal’s JSW Group, despite advanced talks.