Japanese automakers Honda and Nissan, faced with a loss of market share due to the aggressive strategies of Chinese electric vehicle manufacturers, ultimately decided to merge. While Honda and Nissan plan to reduce expenses through the merger, many analysts believe their competitiveness in key future technologies like electric vehicles has diminished, indicating that the impact on domestic companies such as Hyundai Motor and Kia is expected to be limited.
According to major Japanese media outlets including NHK, Honda President Toshihiro Mibe and Nissan CEO Makoto Uchida held a press conference on the 23rd, announcing the start of discussions for a merger and the establishment of an integrated holding company by August 2026. They plan to standardize the Honda and Nissan platforms and integrate their research and development (R&D) and sales networks. The two companies expect to enhance their competitiveness in electric vehicles and hybrid cars through the merger. It is reported that expenses saved by streamlining production facilities, organizations, and functions will primarily be invested in new technologies.
◇ Chinese electric vehicles increase market share… Japan falls behind due to lack of future investments
While Japanese automakers have maintained high competitiveness in the internal combustion engine and hybrid vehicle markets, many have pointed out that they have neglected investments in electric vehicles for a long time. Despite a recent slowdown in electric vehicle growth due to a temporary dip in demand, the percentage of electric vehicles in the global auto market surged from 2% in 2018 to 18% last year. As a result, Japanese automakers have seen their market share decline as they are outpaced by competitors who are ahead in electric vehicles.
Southeast Asia is a key region once dominated by Japanese automakers. However, in recent years, as electric vehicle sales have increased in Southeast Asia, the market share of Japanese companies has declined. According to the Korea Mobility Industry Association (KAMA), the share of Japanese brands in the Southeast Asian market dropped from 73% in 2021 to 68.7% in 2022.
While Japanese companies struggle, Chinese electric vehicle manufacturers are aggressively targeting the market with competitive pricing. The Ministry of Trade, Industry and Energy reported that the market share of Chinese brands in the electric vehicle markets of the ASEAN (Association of Southeast Asian Nations) member states rose from 7% in 2021 to 52% last year. BYD, China’s largest electric vehicle manufacturer, is leading sales in Thailand, Malaysia, and Singapore.
Since 2021, BYD, which sells passenger cars in Europe, announced that it has begun construction of a factory in Hungary and plans to establish production lines in Turkey as well. This move is intended to avoid high tariffs and expand sales in the European market through local production. BYD is also ramping up efforts to enter the Latin American market by deciding to establish factories in Brazil and Mexico.
◇ The impact on Hyundai Motor and Kia is expected to be limited
Honda sold 3.98 million units in the global market last year, and Nissan sold 3.37 million. The combined sales volume of the two companies totaled 7.35 million, surpassing the sales figures of Hyundai Motor and Kia, currently the world’s third-largest automobile group, which sold 7.3 million units. If the merger is successful, it is anticipated that production, sales, and R&D functions will be integrated, enabling reduced expenses and increased investment in new technologies.
However, analysts in the finished vehicle industry indicate that the merger between Honda and Nissan is expected to have a limited impact on major competitors Hyundai Motor and Kia. Both companies lag in terms of technological standards and production capabilities in the electric vehicle sector, and Hyundai Motor and Kia have significantly improved their competitiveness in the hybrid vehicle market, where Japanese cars have traditionally excelled.
Hyundai Motor Group has set a goal to convert all vehicles to electric by 2040 and has been making large-scale investments. Hyundai is currently selling dedicated electric vehicles like the Ioniq 5 and Ioniq 6, and is adding electric models to its main internal combustion engine lineup. Kia is also selling its EV series, which consists of dedicated electric vehicle models. Since October, Hyundai Motor Group has been operating a large-scale eco-friendly car factory called 'Meta Plant' in the United States, enhancing its production capacity.