Honda And Nissan Should Just Be One Company

Peugeot and Citroën are one company. Fiat and Chrysler are one company. Actually, all of those companies are one company now. Why not Nissan and Honda? It would make almost too much sense.

I start this morning’s The Morning Dump (ok, by the time it’s done it’ll only be morning in California, but it’s been one of those days) with news that Honda and Nissan are teaming up on electric cars. Given that many markets they’re in will mandate a huge number of electric cars going forward it makes me wonder why they don’t just become one company.

Perhaps it’ll make them more competitive in China? That’ll be important as both BMW and Volkswagen are reporting first-half financials and both are struggling in the Chinese market.

Toyota isn’t struggling as much with profits still going up, thanks in large part to hybrids.

The Case For Honda-Nissan

The Japanese car market was never big enough to support a homegrown industry focused entirely on itself, which is why Japan became the great automotive exporter of the 20th century. You can go anywhere in the world and find a Toyota, Nissan, or Honda product.

China would like this new century to be defined by exports of Chinese cars, and there’s some evidence they may succeed, but I wouldn’t count out Japan just yet. Carmakers there are still profitable, the engineers remain some of the world’s best, and there’s been a renewed effort to prepare for whatever is to come.

For the last two decades, Japanese automakers have slowly started to coalesce. Daihatsu was swallowed whole by Toyota. Then Subaru teamed up with Toyota. Mazda, once it was separated from Ford, also entered a long-term relationship with… Toyota.

Nissan tried to save itself by teaming up with Renault, which worked until it very much didn’t. Mitsubishi almost failed and was appended onto Nissan at the last minute.

Honda is the one Japanese automaker that’s mostly avoided consolidation, but even Honda has had to partner with other companies to survive. The current generation of Honda and Acura electric cars are based on GM-built Ultium platforms. Honda is also planning to build cars with Sony under a new joint venture.

In general, Japanese automakers have lagged in EV development as they’ve pursued hybridization (which has worked) and hydrogenization (which hasn’t yet).

A hesitancy towards electrification has worked to the advantage of Japanese automakers for now, but Japanese car execs don’t seem to believe this is going to last and want to be prepared for a new, electrified future with software-defined vehicles that are judged as much on their interfaces as their driving performance.

To that end, Honda and Nissan announced a major partnership today. From the press release:

Nissan and Honda are engaged in specific discussions and deliberations with a view to collaborating in various fields to further accelerate efforts to realize a carbon-neutral and traffic-accident-free society. Both companies are promoting R&D and investment in various technologies to promote the spread and evolution of EVs, especially SDVs, which are the scope of study in the fields of intelligence and electrification.

The two companies also believe that the software field, including autonomous driving, connectivity, and AI, which will determine the value of vehicles in the future and become a source of competitiveness, is an area where technological innovation is extremely rapid and where synergies can easily be obtained through the fusion of resources from both companies, such as technological knowledge and human resources.

Here’s what really caught my eye:

With the models to be sold globally by Nissan and Honda, the two companies will consider supplementing models from a short-term to medium- to long-term perspective. For the short-term, Nissan and Honda reached a basic agreement on models and regions to be complemented by each company, and also agreed on the outline of a product review system to be jointly operated by both companies.
ICE and EVs are being considered as vehicles for mutual complementation.

That sounds like building cars together to me. And why not? Toyota has a market cap of almost $300 billion. Honda and Nissan, combined, have a market cap of less than $70 billion. Nissan couldn’t make the Renault relationship work because the underlying concept of a Japanese company being owned by the French state was a bridge too far.

A consolidated Nissan and Honda bring engineering and manufacturing scale without the huge culture clash. I also don’t think their products are so similar that they can’t work in concert. Nissan/Mitsubishi have a truck competency that Honda lacks whereas Honda is way better at building hybrids.

This could just be another tie-up. Or it could be the start of a beautiful friendship.

BMW Getting Hosed Because Of China

German companies are coming out with their first half financial reports and they’re nicht gut. Let’s start with BMW (you can read the company’s report here).

Profits are down 8.6% quarter-over-quarter and 14.2% year-over-year. Margin so far this year has dropped to 11.6% from 16.2% at the same point in 2023. Car deliveries are about in line with last year, so what’s happening?

The pandemic shortages have waned and incentives are up, so that doesn’t help, but also… China.

In China, consumer confidence remains low despite the measures implemented by the central government, as a result of which sales were held down to a level below expectations.

BMW thinks it can improve there, assuming there are no retaliatory tariffs. It was fun while it lasted.

VW: We Gotta Cut

Volkswagen (report here) is facing some of the same dilemmas and is hoping to cut its way to better margins as the operating margin hit 6.3% for the first half of the year (though it improved slightly in Q2).

Here’s what CFO/COO Arno Antlitz had to say:

“Our second quarter margin, before restructuring costs and other non-operational factors, came in slightly above our expectations. But what ultimately counts is the reported result. A margin of 6.3% after six months is below our ambitions and potential, given our array of great vehicles, our brand portfolio, and our global footprint. Given the expected product momentum and a solid order book, we confirm our outlook for the full year. However, we must make significant efforts on the cost side in the second half and beyond in order to achieve our targets.”

That sounds like “cut cut cut” to me.

Toyota Is Still Making Money

Toyota is still bringing in big profits in spite of the company’s latest issues, due in large part to hybrids.

From Automotive News:

In the April-June fiscal first quarter, electrified vehicle sales — including standard and plug-in hybrids as well as full electric vehicles — climbed 24 percent to 1.08 million vehicles.

Standard hybrids, exemplified by the Prius, shot up 24 percent to 998,000 vehicles.

Electrified vehicles accounted for 43 percent of the company’s global retail sales in the quarter, up from 34 percent a year earlier. Total global retail sales at Toyota Motor dropped 4.2 percent to 2.64 million vehicles in the quarter.

Gasoline-electric hybrid cars help bolster Toyota’s bottom line because hybrids typically have fatter margins and command higher sticker prices. They are also in high demand as consumers gravitate toward them as a more affordable, more practical alternative to full electric vehicles.

That’s almost a million hybrids a quarter. They’ll get there.

What I’m Listening To While Writing TMD

One more for the Gen-exers. Here’s “Seether” by Veruca Salt.

The Big Question

Could Honda-Nissan work? Am I losing my mind?