2025 Automotive Industry Predictions: Nissan and Honda Merger Insights

LeeAnn Shattuck (00:01)
Hey everyone, welcome back to The Straight Shift and happy new year. I hope you all had a wonderful holiday season, matter which of the myriad of holidays in December that you celebrate, or if you celebrate none of them, I just hope you had a wonderful end to 2024. I have been getting flooded with questions as one might expect about what’s going to happen in 2025. We always like to know what lies on the road ahead of us.

Will it be a good year to buy cars? Will it not? Well, while none of us truly have a crystal ball, I do want to get into what I think is going to happen next year. If nothing else to combat some of the things that I am seeing on YouTube. And I’m not going to diss the YouTubers because there are so many really good ones out there, but they are playing the click bait game with titles like

The car crash of 2025. The car market is doomed. There’s just all this, “the sky is falling” out there. And I want to set the record a little bit straight and talk about what really is happening, what’s really not happening, because as good and as fun as many YouTubers are, they are not journalists. They’re not economists. And while neither am I, technically, I do have an economics degree and I try to follow the principles of good journalism

when I present information in this podcast. I pull data, because you guys know I’m a nerd. I love my data. So I pull data from some of the best and most reliable industry sources like Cox Automotive, talking to various economists within the automotive industry, the North American Dealers Association, the Automotive News Center, and even the Federal Reserve Bank of St. Louis, which quite randomly tracks historical U.S. motor vehicle sales data, along with production and inventory data.

So I do scour the data, I do my own analysis along with what the economists are saying and what they’re predicting. But quite frankly, we could all just be wrong. It really is gonna depend a lot on how the economy does, which will depend on what the incoming administration actually does versus what they are saying they are going to do. Because if we know anything, they will be unpredictable. So let’s look into that crystal ball as cloudy as it may be,

and just see if we can predict some of the things that will happen in the automotive industry in 2025.

this podcast is going to be a two parter. So this first part, I’m going to give kind of my first prediction, which I will admit is not a huge prediction because they actually broke the news to the public a lot sooner than I was expecting. But I want to talk about the potential Nissan Honda merger. Everyone is asking about that. And I want to clarify they have not merged yet.

What they have done is they have formally signed a sixth month agreement to enter into good faith talks about a potential merger. This means that they’re going to be on their best behavior and they’re really going to try to work out how can they make this work. Their goal is to have an agreement hammered out by the end of June of 2025 and begin implementing that plan in August with the goal of having the merger be complete

by the end of 2025. These things take time. But these talks have actually been going on for months. They just have been going on behind the scenes. The company signed a Memorandum of Understanding, which is a little looser than the agreement that they have currently signed, but they signed that back in August to begin, in good faith, exploring the synergies of what an integration of some sort between the two companies of Honda and Nissan

might look like. How might it work? And even further back than that, in spring of 24, Honda and Nissan forged a strategic partnership to begin collaborating on producing some of the key components of electric vehicles. This is because Honda’s partnership with GM for electric vehicle technology just didn’t pan out the way they wanted to. So they exited that agreement and were looking at other options. Now this potential merger deal

will potentially also include Mitsubishi. That’s because Nissan already owns a portion of Mitsubishi. They made a deal back in September of 2017 that got them 34 % of the Mitsubishi company. Although Mitsubishi has purchased back a number of its shares just recently this November, reducing Nissan’s stake from about 36 % down to about 24%. But Nissan is still the largest

stakeholder in Mitsubishi and therefore Mitsubishi is kind of right now along for the ride to see if it makes sense to be a part of those merger talks, or if it can buy back the rest of its shares, or just kind of how that’s all going to shake out. Infiniti, which is Nissan’s luxury brand kind of like Lexus is Toyota and Acura is Honda. They’re going to be part of this deal simply because they are Nissan. It’s just the luxury brand.

Nissan was already in an alliance with the French automaker Renault dating back to about 1999. Back then Renault saved Nissan’s butt from bankruptcy by assuming over $5 billion in Nissan’s debt in exchange for about 36 % equity stake in the company. If you’re confused, don’t worry, you’re not the only one. The automotive industry is very intertwined with these strategic partnerships and alliances.

and they shift and change every few years depending on how things work out. It is very much a soap opera and it’s hard for those of us in the industry to keep up. But these alliances make sense because the automakers are trying desperately to share and reduce costs, especially now that we’re in this whole new world of technology with electric vehicles and AI and the Chinese are just taking the world by storm.

So it’s a much riskier marketplace to be in. So the automakers having these strategic alliances with each other allows them to achieve more economies of scale and share and reduce a lot of those costs. Of course, this whole Honda Nissan merger thing could completely fall apart. It’s complicated by Renault’s involvement, which is further complicated by the fact that Renault’s major shareholder is the French government.

So there’s just a lot of things to kind of untwine there. And the relationship between Nissan and Renault has been very challenging, shall we say, because there’s a huge cultural difference between the Japanese and their conservative traditionalism and how they have always done things, and the French who are fiery and rebellious and want to do things their own way.

So as you can imagine, those boardroom talks have probably been very, very interesting, but it’s just a culture clash that has not been working out. Nissan has been struggling for decades. So I think that this merger is going to go through. The big question is whether or not Renault will be involved, if they will keep their share in Nissan or in this new company, however that’s going to shake out, or if they are going to sell those shares to Honda,

and let Honda be the majority stakeholder in this deal. A lot of that will depend on whether Renault shareholders think that it’s going to be a benefit to them. If the merger will drive up Nissan share prices, they might keep those shares. Because remember, this is bottom line about money. If they think that the merger is not going to be successful and the share prices are going to drop, they’re going to bail. And they’re going to try and sell those shares to Honda or whomever. They’re going to get out.

So we just don’t know exactly what Renault’s role is going to be, but they definitely have a say in what happens because of the number of shares of Nissan that they own. As I said, Nissan has really been struggling to be profitable for decades, and that’s why they got into bed with Renault in the first place back in 99. But again, it’s not been the saving grace that they really hoped it would be. As I said, part of that’s cultural, but it’s also part to some

alleged financial mismanagement, shall we call it, by the former CEO of Renault-Nissan, Carlos Ghosn. He was actually arrested in Japan in late 2018 and charged with various financial misconduct crimes. He escaped Japan and is currently hiding out in his home country of Lebanon, which does not have an extradition treaty with Japan, nor does it have one with France, which has also charged him with a number of crimes, including money laundering,

misuse of financial funds and tax evasion. Fun fun. Like I said, the automotive industry is such a soap opera or maybe just a bad reality show. But the bottom line is Nissan is still in trouble. They have a new CEO since the end of 2019, Makoto Uchida. And I apologize if I am not saying his name correctly. My pronunciation of Japanese names is not great, but they are happy to be back under the leadership of a Japanese CEO.

Unfortunately, he’s been struggling to turn Nissan around because of course he started this job at the beginning of a pandemic. It wasn’t as if he had a hard job to begin with and then throw in the chaos of the pandemic on top of that. So he’s really been, I think, doing a good job given what he’s had to work with and the incredible challenges that he’s faced. And the pandemic is not entirely to blame for Nissan’s problems. Unfortunately, their product lineup has been outdated,

both in terms of technology and fuel economy. Their reliability is down, kind of like everybody else, and they only have two electric vehicles in the US market, the Leaf and the Ariya, which most people haven’t even heard of. And they have zero hybrid vehicles, which is really where the US market is right now. It’s killing them. also getting killed in the Chinese market, again, along with everyone else,

but they’re finding it nearly impossible to compete with the flood of all these new technology companies that are building electric vehicles out of China and flooding the global market with them, and they’re cheaper. So as a result, Nissan has had to cut 9,000 jobs globally, and they’ve reduced their manufacturing capability by 20%. This is gonna save them about $3 billion, but that’s literally a drop in the bucket of what it costs to operate these companies.

The CEO actually said at a shareholder meeting last fall that Nissan only had about 12 months before they were going to be forced to file bankruptcy. Again. So the CEO, he personally took a 50 % pay cut to help matters and to show the leadership from the top. And that’s unheard of in the automotive industry. It’s kind of unheard of among CEOs to begin with. So that was a very good faith and honorable gesture on his part, but it’s not going to be enough.

Hence, Nissan has entered into talks with Honda. And these talks have likely been accelerated because Foxconn was approaching Renault kind of behind the scenes and talking to them about buying Renault’s shares in Nissan in an effort to quietly take over the Japanese automaker. Let’s pause for a minute. Who the hell is Foxconn, you asked? Well, Foxconn is the nickname of a company called Hon Hai Technology Group.

They are a Taiwanese based technology company that is the world’s largest contract electronics manufacturer. What that means is they are contracted to handle the outsourced manufacturing of everything from iPhones, Playstations, X-Boxes, tablets, Kindles, pretty much all of your electronic devices. Apple, Dell, Samsung, Sony are their biggest customers.

So I guarantee you probably have some sort of electronic device in your home right now that was made by Foxconn. When you hear them say that companies are outsourcing their manufacturing to China, this is what they mean. That is contract manufacturing. Foxconn has long since expressed desire to break into that electric vehicle market. They have all the know-how and the production capabilities to handle the E side of electric vehicles,

but they have no idea how to build cars and they don’t have that infrastructure. But by buying Nissan and their manufacturing infrastructure, their market contacts, their distribution network, Foxconn would very easily be able to buy the V half of EVs, which would get them to market much more quickly. And that’s what Chinese and Taiwanese companies like to do. If they can buy something that someone else already has to get them to market faster,

that’s just smart business and that’s the approach they tend to take. But needless to say, the Japanese company Nissan does not want to be bought out by a Taiwanese company. There is a lot of bad blood between Japan and China, really amongst a lot of the Asian countries. The Japanese would see losing Nissan to a Taiwanese company as a disgrace, as a dishonor. So they would much rather get in bed with Honda

another Japanese company.

So you can see why this would be of advantage to Nissan. But why the heck would Honda want to be a part of this relationship? Why would they want to buy a financially struggling company? Well, Honda’s also getting their butt kicked in China. Again, no surprise, China has surpassed Japan now as the world’s largest exporter of automobiles. But buying Nissan or merging with Nissan would give Honda very quick access to some new vehicle segments that they don’t already have in their lineup,

namely the larger pickup trucks and giant SUVs that are critical to the US market. Honda only has the Ridgeline pickup truck, which is a very small truck and it’s barely good for going to Home Depot and back. And the Pilot is their largest SUV. It’s just a mid-sized three-row. They have nothing that competes with the Chevy Tahos and the Ford Expeditions and the bigger Yukons,

the Suburbans, those big honking SUVs. Nissan has that more or less. They have the large body on frame vehicles like the full size Titan pickup and the large Armada SUV. They don’t have anything as big as a Suburban, very, you know, outside of America, you just don’t see that. But those would give Honda a fast entry into those vehicle segments that are very, profitable in the United States.

And while Honda has kept its own profits above water with their hybrids in the US, as I said, their EV experiment with GM did not work out quite so well and Honda has backed out of that relationship. So the Honda Prologue…

is probably the one and only electric vehicle that you will ever see with a Honda badge and GM underpinnings. We might want to celebrate that. But aside from the few hybrids in Honda’s lineup, the rest of the lineup is quite frankly boring. The tech again is dated, Honda’s reliability is dropped, and I’m gonna do a whole future episode on why that is. And just the value for the price tag, it’s just not there,

when you look at their key competitors from Korea, Hyundai and Kia, who are totally kicking ass in the market, plus also Toyota, who is still the king of hybrids. Now, Honda just can no longer rely on their reputation as Honda in order to sell cars. Consumers are getting smarter and they have much better options to choose from. So Honda is going to need to very seriously up their game. And they’re not going to be able to do that in the current climate

without joining forces with another automaker. Now Nissan might not have been their first choice given their struggles, but again, it is the Japanese partnering with the Japanese and culturally that really works for them. And if they do this merger, which will include Mitsubishi most likely, they would create the world’s third largest automaker behind number one Toyota and number two, wait for it.

Volkswagen. Yes, Volkswagen is actually the second largest in the world. So Honda’s really gambling on size really does matter, right? The sheer size of that company would give them better purchasing power in the marketplace with their vendors and suppliers, which is critical. There’s huge competition in the industry for that.

It would help them ramp up their R &D and it would give them Nissan’s production and manufacturing capabilities. Because while Nissan has been struggling, they have built a large manufacturing infrastructure out there around the world to be able to produce vehicles. Nissan also has some things that Honda does not. They actually have a unique electrified powertrain technology called the e-POWER system that nobody in the world has. This uses an electric motor

to drive the wheels of the vehicle and a traditional gas engine to recharge those electric batteries. So it’s hybrid-ish, but it is different from a traditional hybrid vehicle where the gas engine and the electric motor work together to drive the wheels and propel the vehicle forward. In this case, that gas engine, all it does is act as an onboard generator for the electric batteries

so that the car recharges itself. You don’t have to plug it in like you do a normal plug-in hybrid. It’s really interesting technology and it’s done very, very well in Japan. Of course, we haven’t seen it in the US yet and Nissan had plans to bring those vehicles to the US probably in late 2026, maybe 2027. We’re gonna see if that actually happens and a big part of that will be whether or not this merger goes through. But it’s very intriguing technology that I think

could be very successful in the US because one of people’s fears about electric vehicles is that range anxiety. And this eliminates that. It’s basically like strapping a generator to the back of your EV, which we actually saw somebody do with a Tesla in Western North Carolina this fall. That was very interesting.

You know, Nissan has always been a pioneer in the electric vehicle field. I they came out with the very first electric production vehicle, the Nissan Leaf, back in 2010. They just didn’t go anywhere with it. And I think they were just a little too ahead of the game back then. But because they weren’t a technology company, they didn’t understand how to really make it work the way Tesla did and the way these Chinese manufacturers have because they’ve come to it from such a completely

different frame of mind and design approach and production approach. Still, Nissan has that in its DNA and that will benefit Honda as well. But this merger potential also presents a whole lot of challenges. Despite the fact that they’re both Japanese companies, they have very different approaches to building and selling cars. Their sales strategies are radically different.

Nissan tends to do what a lot of the American manufacturers do and they rely heavily on fleet sales, both rental cars and sales to companies, as well as using rebates and cash discounts in order to sell cars. Honda does neither of these things. They have next to no fleet sales. It’s a very, very small percentage of their sales and you never see big rebates on Hondas.

Instead, they rely on low or zero APRs and lease deals to help sell their cars. This allows them to maintain their residual values, that resale value, it holds them up while still helping make their cars a little bit more affordable. It’s a little more of a sustainable approach and it has worked for them, but it doesn’t work for everybody.

Bigger challenge will be to kind of integrate their very different underlying design and manufacturing philosophies and styles. Even the setup of their production lines are very different, but their approach to R &D and design and just the whole development of automobiles is very different. Nissan is a little different from the other Japanese manufacturers. They are the ones that have kind of set aside tradition a little bit

and embraced innovation, more like the Americans and the Chinese have. They’ve not been afraid to try new things and sometimes fail at them. No, for better or for worse. As I said, they put the first electric vehicle out there on the market with the Leaf. They were one of the first to switch over to continuously variable transmissions from traditional automatic transmissions.

They invented the first variable compression engine, is currently having a lot of problems and costing them money because of weak bearings. And they had this cool e-POWER hybrid-ish electrifying technology. They’re not afraid to try new things and fail initially, but then they work to get the hang of it, very much like the approach that the Chinese and Tesla have done.

Honda, on the other hand, tends to be very conservative in their approach to vehicle development and engineering. Granted, they were an innovator of hybrid technology alongside Toyota. If you remember the original Honda Insight, which was not the most attractive vehicle back in 99, but it was something that really shook up the market because it was one of the first hybrid vehicles.

And they also invented the first fuel cell vehicle, the original Honda Clarity. They abandoned that because there just wasn’t the fuel infrastructure. There was no place for people to refuel a hybrid fuel cell vehicle. Even in California, it was tough. you know, as the rest of the market just kind of went towards EVs, Honda just couldn’t pursue that technology because they didn’t have the support of the rest of the country to make that work.

They did bring the clarity name badge back as a plug-in hybrid, but again, they just haven’t really capitalized on anything but the true hybrids. So they’ve been more conservative in their vehicle and technology designs, which until the last several years has been part of what’s made them reliable. these are all technological and logistical and philosophical puzzles that Honda and Nissan are going to have to resolve if a merger is going to work and it’s going to truly help them

to cut costs and their brands to just survive. But I think that it could be a good marriage, so to speak, because Honda needs to be more bold. Nissan could stand to make a few more conservative decisions, especially financially. But if they can strike a balance and really accentuate the best in each other, it could really work. However, they will need to get the blessing of the Japanese government,

much like a couple needs to get the blessing of their parents in many countries in order to be allowed to marry. You know, as Americans, that’s weird to us. Like, why would a business need the government’s permission to do anything? Well, again, Japan is a very, different culture that is steeped in tradition, and it’s deeply ingrained to have an emphasis on collaboration between businesses and government to make decisions together that prioritize the greater good

of the country, the prosperity of the Japanese nation, not just the profitability of the business. Huge cultural difference. And so they have more of a collaborative and teamwork approach with government as opposed to the adversarial relationship that businesses in the US tend to have with the government. So there are pros and cons to each. We will not debate those, but that’s why the Japanese government is going to have a really big say

in this merger deal. Because when you have these two big manufacturers of automobiles in Japan merging together, the reality is you’re going to see cuts in the workforce, deep cuts in the Japanese workforce. And that goes against the greater good of Japan. So they’re going to have to weigh the short term versus the long term. But they also have to look at what’s the alternative? Nissan completely goes out of business. They get bought out by Foxconn.

And the Japanese government certainly does not want to lose face by losing one of their historical companies to company. So it would be a big dishonor, big losing face. So I think they’re going to have to approve the merger, but they will have a big say, think, in the terms and how it would work as it relates to the effect on the Japanese workforce and the country’s economy as a whole.

And there’s an alternative. They may decide not to merge the companies under a new holding company umbrella. They might instead realize, hey, maybe a strategic partnership that’s much deeper than what they currently have might make more sense for them. But what will this mean for the brands, kind of no matter how they approach if they do truly merge under one holding company,

the individual brands will likely continue to exist. And that’s gonna be kind of interesting because they will be competing with each other on the same market segments where they both do well in the sedans and mostly in the two and three row SUV category. But they would still be sharing R &D, they would be able to leverage technology and platforms, sharing components, and that’s gonna give them the economies of scale and reduce the costs they’re looking for.

But it also means they’re going to have to very carefully navigate the antitrust and security laws that exist in the U.S. And that is a game that Kia have been playing since they came to the U.S. because they are owned by Hyundai Motor Group, the same overall company. But because Hyundai and Kia compete directly with each other, they have to operate very carefully so as not to run afoul of the antitrust laws in the U.S.

So any way this goes, no matter how this merger or strategic partnership or however it shakes out between Honda and Nissan and Mitsubishi and whatever the heck Renault decides to do, it could really shake up the automotive industry, both globally as well as in the U.S. Again, can you imagine if Honda started making big pickup trucks, if they had a big three row SUV to compete with the Tahoe?

If they just started making exciting, fun cars again, you know, back in the day, both Honda and Nissan made really fun, yet also affordable and fuel efficient cars. I would love nothing more than to see that again. I had one with my Toyota Supra in 1985. You my husband had Honda Civics. You know, these cars were really good for what they did.

And I would love to see just some excitement to come back to both brands with the reliability that used to go with it. So we need more affordable cars and having Honda and Nissan come together could help us get there a lot faster. And these types of strategic partnerships are going to happen even more in the industry because we’re just in this whole new world of technology based vehicles.

EVs, other forms of electrification, AIs coming involved. China is just going to force the other manufacturers to band together. It’s like two weak swimmers trying to help each other or two gimpy runners trying to help each other to the finish line. It’s going to happen. And we’re going to see these things come and go like we always had. They don’t always work. That’s why it’s always a soap opera in the industry. It’s kind of incestuous, but

I really am hopeful for this merger. I very much want it to work out for both Honda and Nissan so that we can get back to those fun, affordable and fuel efficient cars.

Thank you for joining me today. This is the first part of my predictions for 2025. I predict that the merger between Nissan and Honda will in fact go through and that ultimately it will be a good thing both for those companies and for us as consumers. So next week, I’m going to get into more predictions for 2025 specifically for the U.S. auto industry, but also for you. What does it mean for you

as a potential car buyer in 2025. Will it be good or will it not? So until next week, please subscribe to the show if you haven’t done so already and share it with your network. And remember, I have an online car buying course that will definitely help you in 2025 no matter what actually happens. And that is my “No BS Guide to Buying a Car – Your Inside Track to Getting the Best Deal.” And you can get that on my website, TheCarChick.com or directly at

carbuyingcourse.com. So until next week, Happy New Year, drive safely, I’m out of here.