Honda and Nissan are reportedly looking at the possibility of merging, sparking speculation about what the potential move could mean – but experts say the rumors of a partnership are not a surprise.
News of the merger talks, which was first reported by the Nikkei newspaper on Tuesday, comes as both Japanese auto giants struggle to compete with the largest global electric vehicle (EV) makers, including Tesla and Chinese automaker BYD.
While neither Honda nor Nissan has confirmed the merger discussions, Brian Moody, the executive editor at Autotrader and Kelley Blue Book, predicted roughly a year ago that there would be more of these types of partnerships, because companies can pool resources and defray costs.
Moody told FOX Business in an interview that if a small brand says it is going to go all-electric that is one thing, but for a large company to do so is a huge undertaking that takes vast amounts of research and development.
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Honda and Nissan are the second- and third-largest auto manufacturers in Japan, respectively, with Toyota leading them both.
The respective market capitalizations of Honda and Nissan are roughly 5.95 trillion yen ($38.8 billion) and 1.17 trillion yen ($7.6 billion).
“A company like Honda might not be able to do that on their own, but at the same time, Honda has some pretty compelling products, so I feel like they both bring something important to the table,” Moody said.
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“But the big thing is pooling resources so that [they] don’t make a bad business decision for a technology, electric cars, that’s growing – but not growing as rapidly as people had maybe thought or hoped,” he added.
So what could a merger potentially mean for the consumer? Moody says he could see the value in smaller, less expensive electric cars coming from such a deal.
“I could even see a merger or a partnership like this resulting in a low-cost sub brand,” he said. “Because that’s what we’re hearing, is that a lot of people, a lot of consumers, are saying, ‘You know, new cars are just too expensive. I can’t buy a new car.'”
FOX Business’ Andrea Margolis and Reuters contributed to this report.
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