No-moats Nissan 7201 and Honda 7267 have announced talks of a possible merger. With no-moat Renault RNO 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.
Key Morningstar Metrics for Renault
• Economic Moat: None
• Morningstar Rating: 5 stars
• Fair Value Estimate: EUR 85
• Morningstar Uncertainty Rating: High
Nissan-Honda: Bigger Than Hyundai-Kia
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.
Renault has successfully streamlined its cost base at lightning speed over the last three years. These learnings could be applied to a merged Nissan-Honda company. We maintain Renault’s fair value estimate of EUR 85 per share, and we will review this upon further details of the merger.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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