Nissan Motor and Honda Motor are in talks to form a new holding company that would own both automakers, creating a potential powerhouse to compete with Toyota, the world’s largest automaker, and Chinese companies like BYD. If successful, this merger could make Nissan-Honda-Mitsubishi the third-largest automaker globally.
The proposed alliance aims to boost competitiveness in the face of rising electric vehicle demand from China-based manufacturers. Nikkei Asia reported that Nissan and Honda are discussing a tripartite merger, which would also include Mitsubishi Motors, a smaller Japanese automaker. This deal could produce around 8 million vehicles annually, rivalling Toyota’s and Volkswagen’s global sales.
However, investors are not overly concerned about this development, as both companies have been struggling with declining sales in China. Nissan saw a 10% decline in Chinese sales through November, while Honda experienced a 30% drop. To counter this, Nissan reduced production by 20%, while Honda cut its output by 10%.
Despite these challenges, analysts still see potential for growth in the long term. Nissan’s consensus outlook predicts respectable sales growth of around 13% from 2024 to 2029, driven by improved competitiveness. Honda, valued below 6 times earnings, pays a dividend yielding 5.3%, and is projected to grow at over 3% annually.
Investors can profit from this news through two scenarios: (1) if the merger happens, improving Honda’s prospects; or (2) buying Honda shares at lower prices before any potential announcement. Regardless of the outcome, investors are given a chance to capitalize on the current situation.
Source: https://www.fool.com/investing/2024/12/18/nissan-and-toyota-stocks-popped-honda-dropped