Broken Talks: Honda & Nissan / Clash Over Hybrid Vehicle Tech Divided Nissan, Honda; But Even Combined, Their Sales Greatly Lag Toyota’s

The Yomiuri Shimbun

19:50 JST, February 15, 2025

This is the second article in a series examining the failed management integration talks between Honda Motor Co. and Nissan Motor Co.

When the cancellation of merger talks between Honda Motor Co. and Nissan Motor Co. was announced on Thursday, one senior Nissan official strongly objected to the “rude things” his side had been told.

In the talks between the two major automakers, not only had Honda demanded that Nissan become its subsidiary, which caused the merger talks to fall through, but it also told Nissan to make sure to restructure its business. Furthermore, Honda proposed that Nissan abandon its original hybrid vehicle (HV) system called “e-Power” and use only Honda’s HV system.

Honda’s proposal injured Nissan’s pride, as the automaker once called itself the “Nissan of technology.”

For Honda, if sales channels for its system were expanded, it would help increase the effectiveness of mass production, which also would help Nissan reduce its procurement costs.

While Nissan once led the world in the mass production of electric vehicles (EVs), it lagged far behind Toyota Motor Corp. and Honda in the introduction of HVs. “It is obvious that we are a little better than Nissan when it comes to HVs,” a senior Honda official said Thursday.

Nissan announced the same day its financial results outlook for the full fiscal year ending March 31, in which it projected a net loss of ¥80 billion. The operating loss for its automobile division amounted to slightly less than ¥200 billion for the April-December 2024 period.

The major cause of this is that Nissan has failed to launch its HV models in the United States, the main market for Nissan where the popularity of HVs is increasing. For Honda, which has seen strong sales of its HVs in the country, boosting Nissan’s sales in the North American market was an urgent issue. As the HV strategy was of crucial importance, the issue became a cause of concern in the merger talks.

In mid-January, the new-car dealerships of Honda and Toyota in the suburbs of Los Angeles were crowded with customers while those of Nissan were quiet and deserted. According to one owner of a Japanese car dealership, Nissans have not been selling well and many people have an impression that Nissan is a cheap brand that lacks freshness.

After the COVID-19 pandemic, price-cutting competition intensified in the United States as car inventories climbed due to the recovery in production. Automakers were forced to increase dealer incentives to support cutting prices. Nissan, which does not sell HVs in the country, was in an especially tough position.

Nissan’s incentive per car was about $4,500 at the end of December about 10% higher than the market average, according to sources.

“We don’t have cars that sell well,” a senior Nissan official said.

For that reason, Nissan repeatedly cut prices — but this hurt its brand image, creating a vicious cycle in which the damaged image causes the sales to fall further.

The reason why Nissan has yet to launch HVs in the United States is the e-Power system. Under this HV system, the engine is used only to generate electricity, allowing quiet driving and smooth acceleration.

However, e-Power vehicles are less fuel-efficient on highways than the HVs sold by Toyota and Honda, making the vehicles unsuitable for the United States, where vast expanses of land mean that many people drive long hours at high speeds.

The difference between companies with HVs and those without them can be seen in their numbers. Compared to Honda, which sold 1.42 million units in the United States last year, Nissan sold only 920,000 units. In the consolidated financial results for the April-December 2024 period, Honda reported an operating profit of about ¥470 billion in North America while Nissan suffered an operating loss of ¥6.2 billion.

This is why Nissan estimates a net loss of ¥80 billion in its financial forecast for the year ending March.

Lagging far behind

To explore the difference in competitiveness between the two automakers, it is necessary to look nearly three decades into the past, at the 1997 launch of Toyota’s Prius, the world’s first mass-produced HV. The Prius combined a gasoline engine and an electric motor and achieved fuel efficiency nearly twice as high as that of a gasoline-only car, which surprised the world.

Honda quickly followed suit by releasing its first HV model, the Insight, in 1999. Japanese automakers excelled in the HV field.

But Nissan lagged far behind them. The automaker finally began selling HVs in 2007 by purchasing a system from Toyota. It released its own mass-produced HV model in 2010. Carlos Ghosn, the president of Nissan at that time, decided to focus on the development of EVs, which determined the fate of the automaker.

But at a Thursday press conference, after explaining why the merger talks had been called off, Nissan President Makoto Uchida signaled a change in direction when he mentioned the introduction of the next-generation e-Power.

“It can demonstrate excellent high-speed fuel efficiency, which is seen as important in foreign countries where people often drive long distances,” he said.

According to Uchida, the new system’s high-speed fuel efficiency will improve on the current level by 15%. Nissan plans to release the next-generation e-Power in Europe in 2025 and in North America in fiscal 2026.

“We decided to include the information in the announcement just before the press conference,” a Nissan director said. “With this, we can vie with Honda.”

In December, Honda unveiled a new system that helps reduce production costs by over 30% compared to the current one. “When it comes to HVs, many people may think of Prius. But our new system will be a game changer,” Honda executive officer Katsuto Hayashi said.

Honda clearly expresses its rivalry with Toyota while seeming not to care about the “Nissan of technology” at all.

Looking at global HV sales in 2024, Honda sold 860,000 units and Nissan 390,000 units. Even if these numbers are combined, Toyota, which sold 4.14 million units worldwide, leaves them far behind.

“Nissan needed to make a bold decision to abandon e-Power and use Honda’s system,” said Atsushi Osanai, a professor at Waseda University.

Was Honda’s proposal to integrate both companies’ HV systems reasonable? Now that the merger talks have been called off, the market will judge the decision of the companies down the road.