If Japanese automakers Nissan and Honda merge, it will provide more room for cost cutting, profitability and more effective investment in electric vehicles and other technologies.
Nissan, which is currently valued at $9 billion, is in even more trouble: poor performance prompted Nissan to make emergency adjustments this month. Nissan CEO Makoto Uchida's turnaround plan includes cutting 9,000 employees worldwide and reducing production capacity by 20%. Visible Alpha predicts that Nissan's automotive division operating profit margin may be only 0.4% by the end of March 2026.
Honda, which is valued at $40 billion, is also performing poorly. Currently, Honda's automotive manufacturing business has an operating profit margin of only 3.6%, far lower than the 18% of its motorcycle division, and analysts estimate that its automotive division's operating profit margin may only increase by about one percentage point by the end of March 2026.
Visible Alpha's forecast data shows that Nissan and Honda will sell nearly 6 million vehicles together in 2026. Since the two companies' key markets are basically the same, a merger may enable them to cut expenses in everything from management and procurement to production and research and development.
However, it may be a difficult task for Nissan and Honda to catch up with Toyota's 10% operating profit margin. Nissan and Honda need to cut costs by about $12 billion, equivalent to 7.5% of the combined revenue of the two automakers.
In theory, Nissan and Honda can achieve an operating profit margin of 3% after the merger without cutting costs. If they cut expenses equivalent to nearly 4% of revenue, it is possible to increase the operating profit margin to 7%. At the same time, the two automakers can cut more costs by merging their auto finance departments.