Honda is in talks to merge with or purchase Nissan. I can’t figure out the rationale. In the old days maybe you’d say that it takes a long time to build factories, establish dealer networks, etc. and, therefore, Nissan’s assets might be valuable. But Tesla and BYD started from nothing and quickly built factories, company-owned stores (better than dealers), engineering, and everything else necessary for being in the car business. In any case, Honda doesn’t have to start from scratch in the car business because it is already well-established in the car business. If Nissan has some good people, Honda could try to hire them away and set them up within their proven-to-be-profitable structure.
What do we see below that Honda doesn’t make or couldn’t make?
The $120,000+ Nissan GT-R is kind of fun, but only about 1,000 are built each year.
More generally, given what Tesla and BYD have accomplished why would a car company ever want to buy another car company?
Nissan Armada? And also Nissan markets, Nissan has market penetration where Honda is not very popular. Could make sense to consolidate major internal combustion engine car makers under same roof.
The Japanese government didn’t want Renault to take over Nissan, despite their saving it, and pushed Carlos Ghosn out when they felt they no longer needed him, mistakenly as it turned out as Nissan resumed tanking.
The Japanese government leaned on Honda to do this rescue/merger, but Honda realizes Nissan’s current management must be eradicated root and branch, and dispensed with the polite fiction this was a merger of equals.
Nissan would be more successful if only it would change its name.
Isn’t Tesla a one-off phenomenon grown by a hype-man and unlikely to ever be replicated again in the same industry? Was it not reliant on: magical timing, government subsidies(tax rebates, carbon credits), hype driven by fraud(B.S. “autopilot” tech and affordable models that were always just around the corner but never materialized) that fueled wildly irrational stock valuation? Is the public gullible enough to fall for a Tesla 2.0? At the end of the day, Tesla has failed at all the long known aspects of auto manufacturing, sales and service, such as QA/fit and finish, parts supply chains, repair, etc. all of which have been long solved for over a century now, but somehow they’re worth more than nearly all the other car manufacturers combined because they started to build electric cars again as had been standard 100 years ago? The magic wasn’t in the product but the hype surrounding them. They failed at the easy parts and hit lighting in a bottle with the hype. Tesla sales are way down and now the hype is wearing thin. Would they ever have made it this far with rationally valued stock prices?
Elon is part of a new era of tech con/hype men. I put Lucky Palmer, the guy who convinced Facebook’s Mark Zuckerberg into losing $100+ billion building the “metaverse” VR/AR initiatives that will likely never pay off, into the same bucket. This is the 4th coming of VR goggles that I have experienced and they just never take off but smart folks keep falling for the same vision over and over. Having failed at the metaverse, Palmer has taken his riches and started a tech inspired defense firm building AI powered drones and whatnot. It’s the same playbook as Tesla, whereby they claim to be revolutionizing an existing industry by sprinkling in some AI here, some other techno razzmatazz there. It’s Truly impressive the hype these guys are able to create.
How long is Space-X sustainable? How big is the market for putting things into space in the long term? Starlink is neat but everything having to do with mars is an absolute waste of money with zero return on investment.
Isn’t Tesla only alive because of its irrational stock value, while Nissan and Honda actually have a long track record of delivering products? As for BYD, who knows how subsidized or sustainable their products truly are.
In the real world, where Tesla and BYD can’t be replicated, why doesn’t a Honda and Nissan merger make any less sense than any other? More market share, economies of scale, etc.
@Senorpablo As a Tesla Model Y owner I agree with you. Paid almost $80k and got a piece of junk. Fell of the hype/con, will never buy a tesla again.
Senorpablo: There is some precedent, I guess, for a merger/acquisition making sense. Chrysler might have made money on the 1987 acquisition of AMC (itself a 1954 merger of Nash and Hudson) due to the subsequent popularity of the Jeep brand and SUVs instead of cars. The economies of scale argument doesn’t make sense to me the way that it once did perhaps due to the fact that the big car companies are less vertically integrated. If desired, Honda can already buy parts from any of the vendors that supply Nissan.
Philip: I hope Honda does not use Nissan suppliers . Only salespeople and dealerships. Nissan’s long-term quality is inferior to Honda’s.
perplexed: I think that the typical car manufacturer already has too many dealers. If the rest of the world is like the U.S. there are more regulations every year and that favors larger enterprises. Also, modern cars are more reliable and need less service than older cars, which expands the number of customers that one dealer can serve even if it doesn’t physically expand.
HR: I was a Tesla hater long before it became fashionable! Examples:
https://philip.greenspun.com/blog/2018/04/01/tesla-is-the-lisp-machine-of-cars/
https://philip.greenspun.com/blog/2015/06/16/tesla-day-trip-3-hours-of-charging-much-anxiety-underperforming-solar-plant/
That said, I become Tesla-curious every time someone reports how well full self-driving works. Driving in the U.S. was fun back in the old days (just you, your manually shifted sports car, and the open road), but most driving for most Americans today is a chore due to the congestion of 2X the population and 2X the number of cars per person. If the task is “keep the car in a box defined by 8 other cars all around it” that’s not fun and it would be nice to turn it over to a computer.
(I was just in the San Francisco Bay Area and then Los Angeles. It wasn’t until I was 1.5 hours away from San Francisco that I had a choice of what speed to travel on a road (no visible car in front of me). In Los Angeles there was never an opportunity for a human to do something different without causing an accident. This might be why Californians are so passionate about self-driving tech. The typical California car own could go for 2 or 3 months without being in a situation where there was some choice associated with the task of driving.)
@philg FSD does not work on most of the local roads, but works fine on highways. I visit SFO bay area couple of times a year, still like driving on 280, generally this does not have much traffic. The traffic congestion is horrible here in Tampa bay area, in my suburb the covid migration from north east increased population by 30% this is creating really bad traffic congestion. The problem with FL is, unlike Texas we do not have many highways and frontage roads and not much space to put new ones.
From Jupiter north to Stuart there are still some times when our beloved minivan isn’t hemmed in by other cars. From Jupiter south to PBI is significantly more congested and from PBI down to Miami it is more or less the same as LA/SF (I didn’t try 280, but some friends came in for dinner in SF via Caltrain and said that they considered 280 far too jammed for practical evening use. One of them has a Tesla S that he loves and it is more than 10 years old. The battery is still in good condition. Not a candidate for FSD, obviously.)
@Senorpablo, the Tesla-hype or the Elon-hype, were else can we find it? Right, the US government-hype.
@philg, isn’t precisely what you describe: Honda being able to buy parts from Nissan’s existing parts suppliers a prime example of economies of scale–creating more leverage to negotiate more favorable terms among a very finite customer and low margin industry such as auto parts?
SP: I don’t know that there are economies of scale in parts purchasing for additional growth beyond Honda’s current size. I don’t think that Toyota and Volkswagen, for example, have dramatically lower costs and higher profits per car than Honda, for example, though both are more than 2X Honda’s size in terms of production. If we truly believe in economies of scale we would have gone long GM and short Ford, but it was in fact the larger GM that went bankrupt.
Not saying there’s value to the merger or value in Nissan to Honda, but in response to some of the above points:
– Nissan has body-on-frame trucks (a popular class of vehicles in the US! but Nissan’s – not so much…)
– Nissan has electric cars (I think Honda currently just has the badge-engineered GM Prologue)
– When Tesla “started from nothing”, they bought the GM/Toyota Fremont plant – so there was presumably some value for Tesla in buying assets from an established manufacturer
At least merging the companies means there’ll only need to be one bankruptcy administration.