Honda and Nissan could merge, triggering a shake-up in the auto industry

In recent discussions, automakers Honda and Nissan have been exploring the potential for a merger, signaling a trend that could reshape the automotive industry. Analysts like Jeff Schuster, global vice president of automotive research at GlobalData, note that while the Honda-Nissan merger may not spark a wave of deals immediately, it could accelerate the ongoing trend of consolidation in the sector. Factors such as increasing technological advancements, the need for extensive research and development, and thin profit margins are contributing to this urge to merge. The automotive landscape is shifting as companies are under pressure to either collaborate or face extinction, particularly given the challenges of new technology and the ongoing evolution toward electric vehicles (EVs). The environment is particularly challenging for automakers who still rely heavily on gas-powered vehicle sales. With many traditional manufacturers struggling, companies like BYD have made significant gains in the EV market, which has already affected European markets and is expected to expand into North America. This pressure is forcing established brands to consider mergers as a viable option for survival - aiming for economies of scale in a competitive and rapidly evolving marketplace. The upward trend in mergers could lead to fewer than six major automotive players remaining in the coming years. Experts suggest a possible scenario involving two key manufacturers each in Japan, Europe, and the United States. Historical mergers, however, have had mixed outcomes, with some like the Chrysler-PSA Group merger into Stellantis facing notable difficulties. This indicates that the path to merger may be fraught with challenges, including internal corporate politics and the emergence of new industry entrants, which could disrupt consolidation efforts. Despite the announcement of alliances, like the one between Honda and Nissan in 2018, true unification may still be a way off due to the complexities involved in merging companies with disparate ownership structures. Future forecasts suggest a gradual contraction in the number of distinct brands, underscoring the critical necessity for automakers to adapt to survive in this fast-evolving sector.