The era of consolidation has fully arrived for the automotive industry, and we have electric vehicles to thank.
Granted, that era almost certainly kicked off a few years ago when Fiat Chrysler and France’s PSA Group combined into Stellantis. And even before that, the now-late CEO of Fiat Chrysler warned that consolidation was the only way that car companies could survive the immense technological challenges ahead—electrification, autonomous vehicles and so on—without spending themselves into oblivion. But I’d argue the loudest bell has just been rung by Honda and Nissan, whose merger plans are now officially underway. Make no mistake: this is a big deal, and it says a lot about where the car business is going next.
That’s the focus of today’s Critical Materials, our morning roundup of technology and “mobility industry” news. Also on deck: smaller and more affordable vehicles are coming back, and a theory about Tesla CEO’s latest moves in Washington, D.C. Let’s dig in.
30%: Details Emerge In Honda-Nissan-Probably Eventually Mitsubishi Merger
Photo by: InsideEVs
Honda Nissan Mitsubishi CEOs
A mere week after a report in Nikkei Asia indicated Honda and Nissan were considering merging into one company, talks between the two automakers officially kicked off in Japan today. “Nissan Motor Co., Ltd. (“Nissan”) and Honda Motor Co., Ltd. (“Honda”) have signed a memorandum of understanding (MOU) to start discussions and considerations toward a business integration between the two companies through the establishment of a joint holding company,” the two said in a joint news release.
That was certainly quick. But it’s probably because Nissan is running out of time. We’ve covered this company’s many problems in the past so I won’t recap them in their entirety here, but just recently, its own executives said it had about 12 to 14 months to survive before it would need some kind of restructuring. Enter Honda, a much more profitable and successful company riding to the rescue of one that’s been lagging technologically and declining in sales for more than half a decade. And the Japanese government may have pushed the two into action after Taiwanese tech giant Foxconn reportedly eyed acquiring some or all of Nissan—an outcome that the country assuredly wouldn’t want.
So how might this work? Here are the highlights, according to their statements today:
- The two will establish a joint holding company that will be the parent company of both Honda and Nissan, with both being fully owned subsidiaries of that company.
- The two say they aim to become a “leading global mobility company” that integrates Honda’s motorcycle and power products businesses with Nissan’s four-wheel vehicle operations.
- They’ll be “standardizing the vehicle platforms of both companies” to cut costs down, while having the capital to make more internal combustion, hybrid and EV models.
- After the merger, Nissan and Honda say they will be better positioned to execute their previously announced team-up on software-defined vehicles and AI.
- Scale, scale, scale. Merging supposedly gives Nissan and Honda a lot to work with when it comes to the supply chain, financing, customer service and more.
- If all goes according to plan, this will be completed by August 2026.
- It’s also very clear who’s helping who here: regulators and shareholders will approve the merger “based on the premise that Nissan’s turnaround actions are steadily executed.” Ouch.
And then there’s Mitsubishi. In a separate statement, the smaller company—itself a part of the Nissan-Renault Alliance—is part of discussions now about “the possibility of achieving synergies at an increased level through Mitsubishi Motors’ participation or involvement in the business integration.” Those discussions are set to begin by the end of January, so it’s very possible we could see news next year of this merger including three companies instead of two.
So besides Nissan’s troubles, why is this happening? Because the future—electric vehicles, autonomous vehicles, AI, connected software tech and more—will be tremendously expensive to deliver. It’s a sea change for a car industry that spent 100 years making internal combustion vehicles, largely by assembling parts from disparate networks of supplier companies.
But the future is more like what Tesla and the Chinese automakers are doing: it’s vertically integrated and focused on technology. And Japan’s automakers are sorely behind the rising Chinese power players. They either have to team up to fight together, or become totally irrelevant.
Yet this merger presents a new set of problems. For one, Honda and Nissan have radically different company cultures; one is led by the engineers, the other by the sales and finance guys. And there’s no guarantee that their combined resources will let them catch up quickly enough.
Finally, there’s the question of whether these mergers are really beneficial or not. The Volkswagen Group and Stellantis have tremendous scale between them, but both conglomerates have had disastrous years in Europe and abroad. Perhaps Nissan-Honda-Mitsubishi’s focus being on Japan, Asia and the U.S. will help avoid the disparate challenges the other two giants deal with. But becoming the world’s third-largest automaker will not fix their mutual problems overnight.
Make no mistake: this merger, and how it plays out, will be one of the decade’s most defining transportation stories.
60%: Are Smaller Vehicles Finally Back?
2026 Chevrolet Bolt EUV Rendering Rear
I just spent the week driving a rented Tesla Model 3 Highland around Texas to see family over the holidays, and I was lamenting how the highest-range, most efficient EVs are always smaller cars and sedans—you know, the stuff Americans don’t want to buy because we’re so obsessed with big SUVs and trucks. But a trend that we’ve covered before has emerged even more clearly as the year wraps up: American buyers are starting to gravitate more to smaller vehicles now.
Above all, you can blame high prices for this change. Here’s the Wall Street Journal:
Sales of some smaller, entry-level models, such as the Honda Civic and Nissan Sentra, have taken off this year, rising 23% or more through November, according to research firm Motor Intelligence. Those increases have far outpaced the industry’s growth, which has been in the low single digits this year.
Meanwhile, large pickup truck sales, long a highly profitable corner of the market for the Detroit car companies, slid 1.9%, data from car-shopping website Edmunds shows. Sales of midsize SUVs, the type of vehicle typically favored by families, have also declined, falling 2.3% over 2023.
This rising interest in smaller offerings comes as owning a car has become increasingly unaffordable. The average selling price of a new car is still at historically high levels, exceeding $45,000 in November, according to J.D. Power. Insurance premiums, financing rates and repair costs have also climbed in recent years, further stretching household budgets.
As expenses have ticked higher, some buyers have become more willing to make a trade-off, sacrificing size and space for a lower monthly payment, analysts say.
“They need the functionality that the vehicle has, but they just need to buy the smaller size,” said Charles Chesbrough, a senior economist at Cox Automotive. “It fits into their wallet.”
If you’re a fan of smaller cars, there are some really positive signs here. The Mazda 3, which is objectively excellent (it’s what I drive when I’m not in our Kia EV6) has seen double-digit sales gains this year. Compact and subcompact SUV sales are up 12% this year, as people still want that extra ride height and capability without going too large. And the Chevrolet Trax, which is finally a pretty good car and can be had in the $20,000 range, saw sales jump 89% in November alone.
So what does this mean for the electric market? I think it vindicates trends we’ve seen there as well: more buyers want affordable options and they’re not interested in huge, luxury EVs with staggering price tags. It’s why Tesla’s Model 3 and Model Y hold the line so well, why the Chevy Equinox EV is doing so well and why there’s so much hype around the new Chevy Bolt EUV due out next year.
People are sick of expensive cars after the pandemic sent everything into a tailspin. That should soon lead to a more attainable electric sector too, hopefully.
90%: Did Musk Intervene In The Government Shutdown To Protect His China Operations?
Photo by: InsideEVs
Meanwhile, in Washington, Congress has averted a government shutdown right before the holidays after passing a stopgap funding bill. But the U.S. came very close to that after Tesla CEO Elon Musk—who’s now deeply involved with the incoming Trump Administration in a vague, unofficial capacity—stirred the pot on X to get lawmakers to kill it.
Why would Musk get so involved in this particular issue? Well, CNBC reports that House Democrats are accusing Musk of intervening to protect his Chinese interests, which could’ve been threatened if the original spending bill had been passed:
House Democrats Jim McGovern of Massachusetts and Rosa DeLauro of Connecticut say their Republican colleagues in Congress caved to the demands of Elon Musk, sinking a bipartisan government funding bill that would have regulated U.S. investments in China.
The scrapped provision “would have made it easier to keep cutting-edge AI and quantum computing tech — as well as jobs — in America,” he wrote. “But Elon had a problem.”
Tesla, run by Musk, is the only foreign automaker to operate a factory in China without a local joint venture. Tesla also built a battery plant down the street from its Shanghai car factory this year, and aims to develop and sell self-driving vehicle technology in China.
“His bottom line depends on staying in China’s good graces,” McGovern wrote about Musk. “He wants to build an AI data center there too — which could endanger U.S. security. He’s been bending over backwards to ingratiate himself with Chinese leaders.”
Musk responded by calling DeLauro an “awful creature” on X. Anyway, we’ll soon see how long Musk’s relationship with Trump lasts if the CEO keeps taking the limelight from the incoming president. But as long as he does have influence in the new White House, expect it to be used accordingly.
100%: What Other Automotive Mergers Could Happen In The Coming Years?
Photo by: InsideEVs
Toyota-Mazda-Subaru? Volkswagen-Xpeng-Rivian? General Motors acquires Jeep, Dodge and Ram from an ailing Stellantis? I don’t think we’ve seen the last of Honda-Nissan-style power mergers. Where do you see this going next?
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