In the wake of the significant fallout from former CEO Carlos Ghosn's departure in 2018, Nissan Motor Co. has struggled to regain its footing.

The company's sales have been stagnant, and it faces the challenge of an outdated vehicle lineup. As of December 2024, Honda Motor Co. extended a potential lifeline by expressing interest in a partnership that could create one of the largest automotive groups in the world—an alliance poised to take on the growing threat from aggressive Chinese electric vehicle (EV) manufacturers.

However, merging two companies with diverse histories and cultures is fraught with challenges, and Honda has made it clear that Nissan needs to stabilize its internal operations before any formal agreement can be reached. The negotiations have hit a standstill due to a precarious power imbalance; Honda's market value is more than four times that of Nissan's. A merger could yield immense cost advantages and greater efficiencies, but significant obstacles remain.

Nissan’s Financial Woes

Nissan's financial outlook appears grim. In the first half of the fiscal year ending September 30, the company reported a staggering 94% drop in net income, suffering particularly from declining profits in its key markets in the U.S. and China. High debt levels, with a series of bonds maturing in 2026, compound the urgency of their situation. In November 2024, the automaker announced plans to lay off 9,000 employees and reduce production capacity by 20%.

The Product Dilemma

The crux of Nissan's issues lies in its product offerings, which have fallen behind those of competitors. Its once-innovative Leaf EV, which gained fame as the first mass-market electric vehicle, is now outclassed by competitors that deliver superior range and technology. While the Leaf was a benchmark vehicle a decade ago, Nissan has failed to evolve its portfolio. The emergence of robust Chinese rivals and the rise in popularity of hybrid vehicles, notably Toyota's Prius, have left Nissan at a crossroads.

Analysts, including James Hong from Macquarie Securities, highlight that Nissan's slow response to market changes and dependence on older inventory have led to significant price cuts and further alienation from customers seeking more advanced alternatives.

What Went Wrong?

The root of Nissan's challenges can possibly be traced back to its last major crisis in the mid-90s when Renault purchased a controlling stake. Ghosn undertook aggressive measures to slash costs, streamline operations, and increase product rollouts. However, this focus on cost reduction came at the expense of innovation, ultimately leading to a lack of competitive products.

The partnership with Renault, which had the potential to enhance product development and innovation through shared resources, deteriorated following Ghosn's arrest in 2018. As a result, Nissan's already dated model lineup has struggled to capture market interest in an evolving automotive landscape.

Competing in the EV Race

Nissan's EV strategies have also faltered. The Leaf's reliance on the CHAdeMO charging standard, which has not gained traction in the U.S. market, has hindered its acceptance. Meanwhile, local Chinese manufacturers are rolling out electric vehicles equipped with cutting-edge technology that resonates with consumers demanding modern capabilities.

The Path Forward

Nissan’s traditional management approach has made it difficult for leadership to unify around solutions and implement necessary innovations. With a new executive lineup announced in late 2024, including CEO Makoto Uchida and new CFO Jeremie Papin, the company now faces the crucial task of revitalizing its strategy and product offerings.

For Nissan to navigate its survival and regain competitive strength, a partnership with Honda could be pivotal—though significant hurdles remain. As the automotive industry continues to pivot towards electrification and advanced technology, Nissan's capacity to adapt and innovate could very well determine its future in an increasingly competitive environment.

Will Nissan rise to the challenge, or is it destined for further decline? Stay tuned for updates on this critical industry story!