Following the breakdown of merger talks between Nissan and Honda, the chairman of Taiwan's Foxconn, Young Liu, stated on February 12, 2025, that the company's goal is cooperation with Nissan, not acquisition. This approach may offer Nissan a less disruptive path to financial stability, technological advancement, and continued innovation.
Foxconn aims to collaborate with Nissan under a commissioned design and manufacturing services (CDMS) model, similar to its partnership with Stellantis, and may consider a stake in the company to facilitate cooperation. However, it intends to remain a Tier 1 supplier, avoiding an outright acquisition and the creation of its own auto brand.
Foxconn's emphasis on cooperation, rather than acquisition, shifts Nissan's position from a potential merger target to a company seeking partnerships for its EV transition. While Nissan initially rebuffed Foxconn, the collapse of merger talks with Honda and the pressure to navigate technological changes left Nissan with fewer options and greater urgency in finding a suitable alliance.
Nevertheless, individuals within the automotive sector and governmental authorities, in statements to Japanese broadcast media, have articulated apprehensions regarding overseas investment, specifically concerning the possible exodus of proprietary technology. A representative from a firm engaged in the automotive business with Nissan confided to Nippon News Network that Japan's automotive industry represents a national patrimony, and the idea of technological diffusion through international collaborations is a source of considerable anxiety. Echoing this sentiment, a government official registered opposition to financial partnerships between Nissan and Foxconn, asserting that augmenting competitiveness through collaborative endeavors centered on technological exchange is of paramount importance.
The Taiwanese approach to mergers and acquisitions
Industry experts highlight the recent resurgence of Taiwanese multinational mergers and acquisitions, citing examples like BenQ's acquisition of Siemens and Foxconn's purchase of Sharp as successful endeavors. However, such success stories are relatively rare, and many Taiwanese companies remain cautious about pursuing similar ventures.
Foxconn has affirmed it will not become an auto "brand," focusing instead on CDMS for electric vehicles (EVs). This approach, similar to BYD's relationship with Toyota or Magna International's complete vehicle production, allows Foxconn to leverage its expertise while maintaining its Tier 1 supplier status.
Mutually beneficial partnership
Foxconn's collaborative approach presents a mutually beneficial opportunity for Nissan, allowing the automaker to retain its brand identity while addressing financial challenges and accelerating its transition to EVs. This partnership model enables Nissan to leverage Foxconn's manufacturing expertise without differing operational approaches leading to significant restructuring or brand dilution.
Foxconn's emphasis on a cooperative partnership with Nissan may reflect strategic considerations aligned with the Japanese government, which will screen any deal involving foreign investment. Given Nissan's acknowledged financial constraints and restructuring plans, including potential layoffs as highlighted by executives in late 2024, a partnership with Foxconn could provide a crucial pathway to long-term stability.
Nissan's situation exemplifies the innovation deficit confronting the Japanese automotive industry, which, despite a history of success with ICEVs, has been slow to adapt to the shift towards electrification and software-defined vehicles. This hesitance, coupled with a bureaucratic culture, has hindered the industry's ability to compete with rivals in China, Europe, and the US particularly in emerging markets like Southeast Asia.
Challenges of EV transition for Japanese automakers
A key challenge for Nissan and other Japanese automakers is the shift to EVs. While Japan has shown a better grasp of the EV market than its European and American counterparts, this has helped Japan avoid the premature investments that led to supply chain issues in Europe and the US in 2024. However, the Chinese market's strong government support continues to pose challenges for foreign automakers, making it hard to predict and respond to demand shifts.
While Japanese automakers have historically adopted a more measured approach to automotive intelligence, the rise of generative AI (GenAI) is prompting a strategic shift. Companies like Toyota, Honda, and Sony Honda Mobility are now actively exploring and integrating GenAI for vehicle design, autonomous driving, and advanced driver-assistance systems. As the automotive industry rapidly evolves, successful collaboration with tech companies and strategic investments in AI will be crucial for Japanese manufacturers to maintain their competitive edge.
