Nissan Needs To Triple Profits, Reclaim Renault Shares For Merger With Honda To Work

Ailing Nissan and rivals Honda officially revealed that talks are underway for a merger between both companies last month, and this could include Mitsubishi as well.

The proposed merger between ailing Nissan and supposed saviours Honda might not happen should the former not be able to present clear profitability. In fact, observers reportedly say that Nissan must triple its profits and reclaim its shares from Renault for this merger to work.

Firstly, tripling its profits is a tall order, especially considering that Nissan saw its operational profitability plummet massively last year by a rate of 90.2%  from JPY336.7 billion (approx. RM10.36 billion) to just JPY32.8 billion (approx. RM1.013 billion).

At the same time, Nissan also saw its nett income took an equally massive 93.5% hit, falling  from JPY296.2 billion (approx. RM9.10 billion) to JPY19.2 billion (approx. RM590.23 million) in the first half of fiscal year 2024 compared to the same period the previous year.

Financially, this merger is a daunting task for Nissan given the fact that it needs to triple its profits and perhaps repurchase its shares from Renault.

Adding to which is the proposed merger’s aims of generating JPY3 trillion (approx. RM85.61 billion) in annual earnings while establishing synergies worth JPY1 trillion (approx. RM28.83 billion). This means Nissan needs to contribute roughly JPY600 billion (RM17.12 billion) in profit over the long term.

However, if Nissan cannot present a credible strategy to triple its profits by the 2026 financial year, then this supposed merger with Honda might fall apart even before it actually begins. What is compounding things further too are reports of Honda requiring Nissan to reclaim shares from Renault.

State-owned French automaker Renault owns a 35.7% stake in Nissan as a result of the Nissan-Renault Alliance partnership formed in 1999 that later included Mitsubishi since 2016. To execute this, observers believe that Nissan needs roughly US$3.6 billion (approx. RM16.22 billion).

Face-lifted eleventh-gen Civic launched locally recently pictured.

This reportedly stems from the risk of Renault’s stakes being purchased by unknown third parties whilst merger plans are underway, which could possibly upend said process too. Fuelling this too were rumoured interest by Foxconn to purchase Renault’s stake in Nissan.

Naturally, this merger between Nissan and Honda may not be idea for Renault either, but the French carmaker has remained cautiously neutral to things. Shortly after the initial merger talks were announced, Renault issued its response saying that it is “considering all options.”

At this stage, it also again worth pointing out that both Honda and Nissan are still ascertaining the viability of this proposed merger. A decision should come by end of this month, and should it be approved, expect more comprehensive actions taken to bring both companies together by late 2026.

With that, any potential bid by Nissan to buy out Renault’s stake will likely begin by end of  this month, at the earliest, too. Even then, there still widespread doubt that Nissan could afford this.