This week, the automotive industry was shaken by news of a potential merger between Nissan and Honda. The rumor sparked a surge in Nissan's share price, which climbed as much as 24% on Wednesday, hitting the daily limit.

However, fresh developments suggest a potential twist in the Nissan-Honda merger narrative, with Taiwan's manufacturing giant Foxconn expressing interest in the scenario.

Foxconn Steps In

Nissan Motor Co., Ltd. is currently grappling with numerous challenges. According to its fiscal first-half 2024 financial results, sales totaled JPY 5.98 trillion, with net profit plummeting 93.5% to JPY 19.22 billion. To alleviate financial strain, Nissan has laid off 9,000 employees globally and cut production capacity by 20%.

Amidst these difficulties, rumors of Nissan's pursuit of change persist, including merger talks with Honda and whispers of Foxconn's acquisition intentions.

Sources close to the matter have revealed that Hon Hai Precision, the parent company of tech juggernaut Foxconn, is in discussions with Nissan and is keen on acquiring a stake in the automaker.

Foxconn's interest extends beyond Nissan's factories and equipment; it aims to acquire the entire business, encompassing models like the Pathfinder, Sentra (Sylphy), and the iconic GTR supercar.

Furthermore, Guan Run, the Chief Strategy Officer leading Hon Hai's EV division, once held a pivotal role at Nissan. His extensive experience at the company could prove invaluable in this acquisition endeavor.

Currently, the exact stage of negotiations between Nissan and Foxconn remains unclear.

Meanwhile, Renault, as Nissan's largest shareholder with a 36% stake, has yet to clarify its position on these developments.

Nissan and Honda Form an 'Alliance of the Disappointed'

Foxconn's involvement has added an element of uncertainty to Nissan's future and accelerated merger talks between Honda and Nissan.

Honda has issued a stern warning, stating, "If Nissan collaborates with Hon Hai, our partnership will be rendered void." Honda further hinted that "in the event of a hostile takeover by Foxconn, Honda stands ready to act as Nissan's savior, safeguarding the fruits of our long-standing collaboration." (Original Japanese statement translated for clarity and impact.)

Shinji Aoyama, Honda's Executive Vice President, revealed that the company is exploring various options for merging with Nissan, including "capital cooperation" or "forming a new holding company."

The deal might even encompass Mitsubishi Corporation within the holding company structure.

A merger between Honda and Nissan would realign the Japanese automotive landscape into two major factions: one comprising Honda, Nissan, and Mitsubishi, and the other led by Toyota Motor Corporation.

In the first half of this year, Honda, Nissan, and Mitsubishi collectively sold approximately 4 million vehicles globally, significantly trailing Toyota's 5.2 million units. A merged entity would better position itself to compete with Toyota in the global market.

Honda and Nissan could officially announce their merger as early as December 23, aiming to sign a memorandum of understanding to discuss equity sharing in the new holding company.

For Nissan, partnering with Foxconn might provide immediate financial relief but could jeopardize its relationship with Honda, clouding future market prospects. Conversely, a merger with Honda would bolster market competitiveness, facilitate resource sharing, and complement each other's strengths. However, a formal decision from both parties remains pending.