Renault: A Nissan-Honda Merger Would Be Positive for Renault’s Associate Income

No-moats Nissan and Honda have announced talks of a possible merger. With no-moat Renault being Nissan’s largest shareholder, Renault will be instrumental to the transaction. We view such a merger as positive for Renault. A merged entity would benefit from greater scale. Nissan has lost meaningful scale since before the covid pandemic, with sales volumes having declined to 3.4 million in 2023 from 4.9 million in 2019 (5.5 million in 2018.) Nissan has struggled to cut costs fast enough to match this now lower scale. Combined with Honda’s 2023 3.7 million vehicle sales, the merged entity would surpass the scale of the Hyundai-Kia partnership's vehicle sales of 7.3 million in 2023, making it the third largest global automotive original equipment manufacturer. There is also market talk about the inclusion of Mitsubishi into a final merged entity.