For decades, Nissan and Honda have competed with one another in just about every way possible, except for pickup trucks and motorcycles. That’s why the world was shocked last year when the rivals announced a $60 billion plan to merge into one company in what was seen as the biggest move toward auto industry consolidation yet. After all, it’s a volatile time in the car business; the race for batteries and software has every company on edge, and global trade tensions make the situation even more unpredictable.
But a lot can change in just a few months. Now, reports are coming out of Japan that the Nissan-Honda merger is off the table.
We’ll dig into what we know and why that’s the case in this edition of Critical Materials, our morning roundup of industry and technology news. Plus, now-shuttered robotaxi company Cruise’s reintegration with General Motors will come at a big cost, and a look at how tariffs could slow China’s economy even more. Let’s dig in.
30%: Nissan-Honda May Be Dead Before It Started
Photo by: Nissan
First, some music to set the mood:
Now that that’s out of the way, here’s what we know. Reports are coming out of Asia this morning that at Nissan’s behest, interestingly enough, merger talks with Honda will be suspended. The two companies have been “unable to reach a consensus on the terms of the deal,” Nikkei Asia reports.
In part, this seems to stem from the fact that this was no “merger of equals,” as the ill-fated Daimler-Chrysler tie-up was called 20 years ago. This was very much Honda—a profitable, strong-selling global automaker with a promising approach to future technology—riding to the rescue of Nissan, which has been hemorrhaging cash and recently claimed it had a runway of 12 to 14 months before bankruptcy reorganization could be a thing.
Many industry observers believed the merger talks were motivated by the Japanese government, which obviously doesn’t want to see one of its biggest companies (and a major global employer) go under or get snatched up by a foreign firm. And yet, Nissan somehow isn’t okay with being the junior partner in this arrangement. Per Nikkei Asia:
Honda proposed that Nissan become its subsidiary, which the latter rejected. Honda and Nissan had planned to announce the outcome of their initial talks by mid-February. It is undecided whether there is a possibility of restarting the talks or whether only the collaboration on electric vehicles will continue.
Honda had set the end of January as the deadline for Nissan to present a plan for “turnaround actions” to improve its business performance, which the agreement stated as “the premise” of the business integration.
Despite its announcement in November to cut 9,000 jobs globally, Nissan has struggled to finalize its plan due to strong resistance to staff cuts at factories in various locations.
Honda proposed that Nissan could become a subsidiary as a way to speed up restructuring, but Nissan — which sought a near-equal role in the merger — grew increasingly confrontational with Honda. Mounting differences between the two companies made both sides conclude that it would be difficult to continue integration talks.
There are a few things to unpack here. For one, given that Nissan’s dire straits are hardly a secret, I don’t know what board members and shareholders expected here. This deal was largely understood to be a rescue operation of sorts by Honda. Unfortunate as these things are, job cuts and factory downsizing always seemed to be in order.
And then there’s the fact that from a product standpoint, the merger itself never made much sense.
In theory, Honda and Nissan would be able to share capital and R&D resources to make the electric, software-powered cars of the future at a time when China’s automakers have a very significant lead. But in reality, the two companies had a ton of overlapping products, few potential factory synergies and it’s unclear what tech expertise Nissan was even bringing to the trouble.
Even Honda’s own CEO struggled to explain why the deal made sense for his company.
But that was all in 2024, which feels like 50 years ago instead of just six weeks. Now, Reuters reports that President Donald Trump’s tariff threats may have thrown a huge wrench into these plans. Honda has a parts and manufacturing presence in Mexico (and Canada) but Nissan is very big south of the border. Any tariff turmoil would’ve been especially impactful to that company.
The tie-up talks have coincided with disruption posed by potential tariffs from U.S. President Donald Trump. Tariffs against Mexico would be more painful for Nissan than for Honda or Toyota, analysts say.
“Investors may get concerned about Nissan’s future (and) turnaround,” said Morningstar analyst Vincent Sun, adding: “Nissan also has a larger risk exposure to U.S.-Mexico tariffs than Honda and Toyota.”
So it seems that issues over control were the main factor in this reported break-up, but had talks continued to develop, tariffs would’ve likely made shareholders even more nervous.
It’s important to note that this news does not come from official statements from either company, and it’s certainly possible that talks could resume. But for now, perhaps these two are going their own ways—which begs the question, who’s going to ride to Nissan’s rescue now?
I’m not ruling out a Chinese automaker, either. That would allow an instant foothold into the U.S. market, if conditions allowed it. But we’ll see.
60%: Cruise Staff Cut In Half Before They Join GM
GM had a great year on the EV front, but it ended 2024 on two down-notes: a big loss from restructuring its China business, and ending its dedicated robotaxi service, Cruise. GM will instead pivot to focusing on autonomy and automated driving assistance for consumers, like growing its Super Cruise hands-free driving user base.
GM officials said last year that the plan was to fold all of these self-driving expert staffers at Cruise back into the parent company. But Bloomberg reported yesterday that this move will come with some big layoffs as well:
General Motors Co. is cutting almost half of the workforce in the Cruise driverless car unit, according to an internal memo and people familiar with the matter, part of a previously announced plan to halt robotaxi service and absorb the operations into its broader business.
Several of Cruise’s leaders, including Chief Executive Officer Marc Whitten, will leave this week in the overhaul, the company revealed Tuesday in an email to employees sent by President Craig Glidden. The total staff reductions amount to about 1,000 positions, said the people, who asked not to be identified discussing private matters.
With Cruise goes the company’s aspiration of using robotaxi fares to help double revenue by 2030. Instead, GM will focus its cash and resources on share buybacks and its electric vehicle business, which remains a priority even as President Donald Trump threatens to end consumer tax credits for EVs. GM said recently that its actions with Cruise would save about $500 million this year and twice as much in subsequent years.
Also very unfortunate, as some truly brilliant people work at Cruise right now. But the robotaxi wars are just starting to heat up again; we’ll likely see more players drop out down the line.
90%: What Tariffs Mean For China
After a very tense 72 hours or so on Monday, the U.S. reached an agreement with Canada and Mexico to postpone stiff new 25% tariffs for at least 30 days. But planned 10% tariffs on Chinese goods are still going into effect.
Now, unlike cars made in Canada and Mexico, this won’t affect U.S. car prices quite as directly because so few models sold here are made in China. (Anti-China tariffs would’ve likely had an impact more downstream, like making parts more expensive and so on.) But there’s a wider challenge here for China as a whole: its economy had been slowing down for a while, and tariffs will only turn up the heat. From CNBC:
The imminent U.S. tariffs are likely to deal a significant blow to China’s already-faltering economy, reinforcing calls for more forceful stimulus measures to bolster the country’s growth.
U.S. President Donald Trump on Saturday followed through on a threat made after his presidential victory, imposing 10% tariffs on Chinese goods, starting Tuesday, over Beijing’s alleged failure to prevent the flow of fentanyl into the U.S.
The investment bank expects China’s real GDP growth to slow to 4.5% this year while domestic price growth remains under pressure due to weak demand, with consumer inflation expected to rise just 0.4% in 2025.
The consumer price inflation barely grew last year, rising 0.2% year on year. Higher U.S. tariffs could further strain domestic prices as external demand for Chinese goods weaken.
While the economy hit the growth target of 5.0% last year, it struggled to emerge from a real estate collapse and weak consumer and business confidence, leaving exports as a key driver of growth. Even in 2023, exports contributed almost 20% of the country’s GDP, according to World Bank data.
But that, of course, will have a big impact on the auto market. As I mentioned before (and fairly constantly here on InsideEVs), China has the lead on making software-defined EVs and plug-in hybrids. Much of that growth—though certainly not all of it—was fueled by state investment. Yet China’s own domestic car sales were beginning to slow down. Car brands were closing up shop or merging with one another. And tariffs in Europe and the U.S. are limiting China’s ability to export cars already.
The point is, a slowdown in the Chinese economy could, in theory, give other global automakers time to catch up. I’m reminded of Japan’s technological dominance in cars in the 1980s and early 1990s until the bubble burst. But it’s not quite the same thing. After all, big Western players like GM and Volkswagen still sell a lot of cars in China and they need that market to be viable. And even if China sees a downturn, it still has a huge global hold on the EV and battery supply chain. That’s unlikely to go anywhere.
Either way, this is a story we’ll be watching carefully this year.
100%: Who Rescues Nissan Now?
I’m not sure I’d rule out a Nissan-Honda merger just yet. But in case Honda’s out for good, who makes a good partner to reverse Nissan’s fortunes? Or is something more drastic in the cards? Let us know what you think in the comments below.
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