Honda wants Nissan to buy Renault ahead of merger

After the merger, Honda-Nissan will become the world’s third-largest automaker by total sales

Merger discussions between Honda and Nissan are currently underway. By working together, Honda-Nissan will improve cost efficiency and production capabilities. They will be better able to deal with threats from Chinese electric car manufacturers. If all goes well, the Honda-Nissan merger could be completed in 2026.

Request to buy out Renault shares

Honda has asked Nissan to resolve its existing alliance with Renault, a new report claims. This would require Nissan to acquire Renault’s stake in the company. As of now, Renault holds 35.7% of Nissan’s shares. This makes Renault Nissan’s largest single shareholder. At its peak, Renault’s share of Nissan was 43%. However, that price has now declined due to multiple share sales transactions during 2023 and 2024.

Neither Honda nor Nissan has made any official statement regarding the acquisition of Renault shares. The amount involved is huge (Rs 31,457 crore) and this is a major challenge for Nissan to overcome. Nissan’s current financial situation is not very good. In the first half of Japan’s fiscal year (April 1 to September 30), the company’s operating profit margin was only 0.5%. Compared with the previous fiscal year’s figures, year-on-year negative growth was approximately 90%. The data suggests Nissan may not currently have the cash or cash equivalents to acquire Renault’s stake.

However, it is unclear whether this demand is a prerequisite for the Honda-Nissan merger to be finalized. Honda may be concerned about Renault’s stake in Nissan as foreign entities may be considering buying the shares. For example, there are reports that Taiwan’s Foxconn is looking to acquire Renault’s stake in Nissan.

Foxconn is a leading manufacturer of electronic products for top brands such as Apple, Microsoft, Dell, Sony, Google, Amazon, and Nintendo. Foxconn’s interest in Renault’s stake comes as the company looks to get into the electric vehicle business. Initial discussions between Foxconn and Nissan failed to reach a mutually beneficial agreement.

Honda-Nissan merger – not a bailout

While Honda may be trying to save Nissan, both brands deny this claim. The reality is that the merger will only happen if Nissan can overcome its financial difficulties. At a recent media conference, Honda CEO Toshihiro Mibe said the merger would not go ahead unless the turnaround measures taken were successful. The success of these initiatives is the first prerequisite for the merger. Toshihiro said the goal of the merger deal is to create an ecosystem where both brands can thrive. Unless this happens, it will be difficult to achieve common goals.

The Renault-Nissan-Mitsubishi Alliance began with the merger of Renault and Nissan in 1999. Mitsubishi joined later in 2016. The alliance operates through a cross-sharing agreement and is not a traditional merger or acquisition.

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