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Japanese automotive giant Nissan experienced its most significant share price decline since August’s market downturn, as investors scrutinised the implications of its proposed merger with domestic competitors Honda and Mitsubishi. The company’s shares plunged by 15% during Friday’s trading before recovering slightly to close 7.8% lower.
The dramatic decline follows a remarkable 20% surge on 17 December when initial reports emerged about potential merger discussions with Honda. The three Japanese automakers are exploring a strategic alliance to combat declining sales figures and mounting pressure from Chinese manufacturers in the global market.
Both Nissan and Honda have confirmed their intention to evaluate a business integration through the establishment of a joint holding company, with Mitsubishi expected to announce its participation decision by January’s end. The proposed merger would unite Japan’s second and third-largest automotive manufacturers, potentially creating the world’s third-largest automotive group by annual sales, trailing only Toyota and Volkswagen.
Market analysts suggest investor disappointment stems from the anticipated 5:1 share transfer ratio in the potential Honda merger, as reported by Nikkei. This ratio has raised eyebrows given Honda’s market capitalisation is approximately four times that of Nissan. The development marks a crucial juncture for Nissan shareholders who have endured years of crisis, declining profits, and the aftermath of former CEO Carlos Ghosn’s 2018 arrest.
Despite Friday’s share price volatility, the broader Japanese market displayed resilience, with the Nikkei index closing 1.8% higher, reaching a five-month peak. Honda’s shares maintained positive momentum, closing 2% higher and recording nearly 20% growth since the merger discussions became public, while Nissan’s shares have surged by 50% during the same period.
The proposed consolidation reflects the increasing pressure on traditional automakers to secure funding for the transition to electric vehicles, as Toyota maintains its competitive edge through early adoption of hybrid technology. This strategic move could reshape the global automotive landscape and signal a new era of consolidation in the industry.
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