Japan’s three major automobile companies – Honda, NISSAN and Mitsubishi – have officially closed their business integration conversations.

These companies issued a joint statement on Thursday saying that they have decided to end the agreement to consider the structure of business cooperation.

What was this proposed agreement?

• Honda and Nissan announced in December 2023 that they are working on a plan to create a joint holding company.
• Mitsubishi Motors was also considering joining this partnership.
• The agreement was aimed at working on smart car technology such as electric vehicles (EVs) and autonomous driving.

However, after several months of talks, the three companies decided that they would not move towards trade integration.

Why did this alliance surprise analysts?

Ever since the announcement of this alliance, experts in the automobile industry found this decision shocking.

The model lineup and market strategy of Honda and Nissan is largely the same.
The entry of new companies like Tesla and Byd has already intensified competition in the electric vehicle segment.
Honda’s financial position is strong, while Nissan has been in losses for the last few years.

Analysts believe that differences could arise over leadership and strategy in this proposed partnership.

Why did the partnership fail?

There are many possible reasons behind the failure of the conversation:

Nissan refuses to play the role of a small participant

• According to Japanese media reports, NISSAN was hesitating to play a subordinate role of Honda in this alliance.
• Honda’s financial position is strong, and was likely to get a leadership role in this joint team.

NISSAN’s weak economic status

• NISSAN recorded heavy losses in the July-September quarter, causing the company to cut 9,000 jobs.
• CEO Makoto Uchida took responsibility for this loss and cut his salary by 50%.
• Nissan rarely wanted to take any big risk due to weak economic condition.

Rapid change and increasing competition in EV market

• Tesla, byd and other companies are aggressively expanding in the EV market.
• Japanese automobile companies may have more confidence in their independent strategies.

What next? Next step of Honda, Nissan and Mitsubishi

The conversation may have failed, but the three companies will continue to work together in some areas.

Companies have said that they will continue to cooperate on technology such as electric vehicles (EVS) and autonomous driving.

However, it has now become clear that the plan to integrate or create a holding company has been completely closed.

Will investors affect?

After this news came, Honda, NISSAN and Mitsubishi saw a mild reaction to the stock market.
Investors already feared that this partnership would not be successful.
Honda is fully prepared to move forward on its independent strategy.