The Great Defeat of Japanese Automotive Giants

Author | Wang Xiaojuan

Editor | Zhou Zhiyu

The survival anxiety in the automotive industry is spreading worldwide.

Following the closure of factories and layoffs by many established German car manufacturers, the Japanese automotive industry is also experiencing a series of shocks. The long-rumored merger negotiations between Japanese automakers Nissan and Honda have recently entered the negotiation phase. Additionally, there are reports that Mitsubishi Motors may also join the merger talks.

Strategic alliances are also a means for companies to combat changes in the external environment.

In recent years, Nissan, Honda, and Mitsubishi have all seen their market shares decline in major markets, gradually losing their competitive edge in the fierce market competition. Data shows that in the first half of this year, the three companies collectively sold about 4 million vehicles globally, far below Toyota, the leader among Japanese automakers, which sold 5.2 million vehicles.

Although Nissan's survival concerns are the most apparent at present, the overall brilliance of Japanese automakers is also fading, as they continue to lose ground in the global market and face transformation challenges.

Nissan's Predicament

Twenty days ago, two Nissan executives publicly stated that the company only has a turnover time of 12 to 14 months, and the situation is worsening, urgently needing cash from Japan and the United States.

The market has just realized that this world-renowned automotive giant has reached such a point. However, Nissan's decline actually began much earlier.

In the fiscal year 2018, Nissan's total global sales were 5.516 million units, a decrease of 4.4%, marking the beginning of Nissan's downturn. This is reflected in sales figures, as from April to September this year, Nissan's global new car sales fell by 1.6% year-on-year to 1.596 million units. This sales performance is already difficult to compare with its peak period.

A series of even worse scenarios are directly reflected in the financial reports.

By this year, in the first half of the fiscal year 2024 (April to September this year), Nissan's net revenue fell by 1.3% year-on-year to 5.9842 trillion yen (approximately 290 billion yuan, with the current exchange rate about 20.6:1), operating profit dropped by 90.2% to 32.9 billion yen, and net profit was 19.2 billion yen, a year-on-year decline of 93.5%.

The significant drop in profits is a key reason for the company's urgent search for new avenues such as mergers. Facing the overall situation of this fiscal year, Nissan is also extremely pessimistic, revising its originally forecasted surplus of 300 billion yen for the entire year's net profit to "undetermined."

Nissan's decline is mainly reflected in the drop in its largest market shares in China and the United States.

Since last year, the North American market, which has been Nissan's main sales market, has seen growth stagnate. In recent years, Nissan has launched fewer new vehicles, making it difficult to provide hybrid models that users prefer, leading many customers to be attracted to Toyota and Honda instead. Additionally, Nissan's dealerships in the U.S. are overly saturated, competition is fierce, inventory cycles are lengthening, and profits are hard to maintain.

In China, the decline is the fate of most joint venture brands, and Nissan is no exception.

Since 2022, Nissan's sales in China have been declining at a double-digit rate each year, with sales in 2022 at 1.0452 million units, a year-on-year drop of 22.1%; In the first 11 months of this year, Nissan's total cumulative sales reached 621,700 vehicles, a year-on-year decline of 10.53%. This means that it seems difficult for Nissan to surpass the 700,000 vehicle threshold this year.

Although the global automotive industry is undergoing transformation, Nissan's decline and the issues with its transformation are only part of the problem. Since the change in the partnership between Nissan and Renault in 2018, Nissan has been in a state of chaos.

In recent years, Renault has gradually reduced its stake in Nissan, which has decreased from 43% to 15% this year. Internally, Nissan has also faced internal strife and other issues, even experiencing significant losses, such as a net loss of 671 billion yen in the fiscal year 2019.

This year, facing a difficult situation, Nissan is also trying various ways to survive.

In addition to seeking mergers, there are a series of cost-cutting plans, such as reducing global production capacity by 20%, laying off 9,000 employees worldwide, and Nissan's CEO Makoto Uchida announced that he would voluntarily forgo 50% of his monthly salary starting in November, with other executive committee members also voluntarily reducing their salaries accordingly.

However, these measures are unlikely to make the future more promising.

Regarding the Chinese market, Nissan is also undergoing some transformations. Recently, Nissan announced that its current Chief Financial Officer (CFO) Stephen Ma will serve as the chairman of the Nissan China Management Committee.

Stephen Ma is considered a Nissan executive familiar with the Chinese market, having served as Vice President of Dongfeng Limited in 2012, experiencing Nissan's rapid growth during its golden years in China, and returning to Nissan's headquarters in 2018 to serve as CFO.

Additionally, during the joint venture transformation period, Dongfeng provided significant support. Recently, Dongfeng Nissan stated that it would invest 10 billion yuan in research and development. This year, Nissan has fully acquired the former Renault-Nissan-Mitsubishi Alliance Innovation Center (Shanghai) and established Nissan Technology Development (Shanghai) Co., Ltd., which will focus on electrification, autonomous driving, and connected vehicles.

Seeking Change Together

Currently, the century-old automotive industry is undergoing an unprecedented energy transformation, which will inevitably lead to a re-evaluation of the status of companies within the industry.

The three major Japanese automakers were once global automotive giants, and Japanese cars were once bestsellers worldwide. Today, although Toyota remains strong, it is not without concerns, while the other two companies are facing significant setbacks, standing on the brink of mergers.

Moreover, this year, Japanese automakers represented by Toyota have been exposed to widespread production violations and fraudulent issues with certain models, which has damaged the reputation of Japanese cars.

According to the financial reports for the first half of the 2025 fiscal year released by seven Japanese companies, aside from Nissan, the net profits of Toyota, Honda, Mitsubishi, and Mazda have all declined to varying degrees compared to the same period last year.

As early as 2022, the total new car sales of Japan's six major automakers in the United States decreased by 17.9% year-on-year; a significant portion of this lost market share was taken by Tesla.

In the past two years, the most significant decline for Japanese cars has occurred in the Chinese market, where the transformation is most intense. Since last year, joint venture cars have faced varying degrees of decline, and Japanese cars, which once dominated the mainstream market, have seen their market share taken by brands like BYD, with monthly sales experiencing nearly double-digit year-on-year declines Taking the sales data from the first 11 months of this year as an example, FAW Toyota remains relatively strong, with sales of 701,400 vehicles, down 2.14%; GAC Toyota's sales were 701,100 vehicles, a year-on-year decline of 14.94%; Honda's overall terminal sales in China were 740,400 vehicles, a decrease of 30%; Changan Mazda's sales have fallen below 70,000 vehicles, down 12.9%, and Mitsubishi has exited the Chinese market in 2023.

According to data from the Passenger Car Association, the market share of Japanese cars in China has dropped from 22.6% in 2021 to 13.7%.

In the Southeast Asian market, where Japanese cars have the highest loyalty, some new changes are also occurring.

In recent years, Chinese automotive companies have been eyeing Southeast Asia. Taking Thailand as an example, there are multiple policies supporting the development of new energy, which is clearly more favorable for Chinese new energy vehicle companies going abroad.

Currently, mergers seem to be the best way for several companies to huddle together for warmth. However, it does not seem easy for intertwined giants to merge.

In 2019, after Nissan released a financial report showing nearly halved operating profits and significant declines in various indicators, the Japanese government pressured the two companies to consider merging.

However, the entanglement dragged on for years, and it wasn't until Nissan's situation gradually worsened this year that more progress was made on the merger. In March and August of this year, Nissan, Honda, and Mitsubishi Motors announced that they would integrate their respective advantages and explore various cooperation possibilities.

In this transformation, whether newcomers can successfully challenge and whether traditional manufacturers can maintain their past advantages will depend on their ability to provide products that meet the needs of target users in the era of electrification and intelligence.

This merger story will eventually come to an end, and in the future, if the merger is realized, the newly formed company will become the third-largest automotive company in the world. Whether the new alliance can launch products as popular as before in response to changing demands and regain global users' favor will depend on their subsequent performance.

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