As 2024 starts drawing to a close, it's more clear than ever that the business-as-usual era of the traditional auto industry is over.
You won't find just one reason for this. It's high interest rates and new car prices people can't afford, it's intensifying competition in once-lucrative China, it's consumer interest shifting to electrified cars and the high capital costs involved with making them... the list goes on. As we've seen with other industries in transitions, not every major player survives intact, and it may be time to start wondering who goes down first in the autos sector. Is Nissan due for such a reckoning?
That kicks off today's edition of Critical Materials, our morning roundup of auto industry and tech news. Also on tap today: how Korea's Hyundai Motor Group plans to do battle against China's electric vehicle sector, and Mexico gets cold feet over a possible BYD factory as President Trump seeks to intensify a trade war before he's even back in office.
As a programming note, your hardworking InsideEVs staff will be on more limited duty over the next few days over Thanksgiving weekend. We'll resume normal service next week, and we wish you and yours a wonderful holiday in the meantime.
30%: Nissan's 'Make Or Break' 12-14 Months Ahead
I tend to think three big, traditional automakers took especially hard hits this year. The first two are Volkswagen and Stellantis, the poster children for the declining European auto sector and what happens when China sales stop paying the bills like they used to. The other is Nissan. Once, it was Japan's no. 2 automaker behind Toyota and an early pioneer in the EV space in its own right.
But Nissan has been in steady and unfortunate decline for years, having struggled with the ouster of the top boss who once held its shaky 25-year-old alliance with Renault together, a subsequent exodus of talent, a protracted renegotiation of that alliance and just taking its eye off the ball in terms of products when it was distracted by all of that chaos. Frankly, it's hard to fathom what's gone right for Nissan over the last few years. Profits were down a staggering 85% in Japan's Q2 of this year.
Now, Renault is in the process of offloading a substantial share of its stake in Nissan. And Nissan desperately needs a capital partner or its very survival is at stake, anonymous officials told the Financial Times:
Two people with knowledge of the talks said Nissan was seeking a long-term, steady shareholder such as a bank or insurance group to replace some of Renault’s equity holding, as Nissan finalises the terms of its new electric vehicle partnership with arch-rival Honda. “We have 12 or 14 months to survive,” said a senior official close to Nissan.
Nissan has not ruled out having Honda buy some of its shares, with “all options” being considered, as it launches a series of restructuring measures on the back of declining sales in both China and the US, the people said.
[...] After their capital recalibration last year, the French carmaker cut its Nissan holding to just under 36 per cent, including a remaining 18.7 per cent in a French trust, which it has been whittling down. Nissan gained voting rights for its 15 per cent stake in Renault, which will retain a 15 per cent voting stake in the Japanese group.
Ouch. As that story notes, Nissan sells no hybrid cars in the U.S. at present, though it once did. Yet hybrid cars are doing wonders for Toyota, Hyundai, Kia and even Ford at the moment; while the Ariya is a solid EV, Nissan's old-school internal combustion powertrains just aren't competitive in the 2020s.
You may recall that Nissan and Honda are forging a partnership to collaborate on future EV powertrains and software. They're doing so because Japan Inc. is pretty far behind China at making the EVs of the future, and they need to team up to win together; another burgeoning alliance to do the same is Toyota's team-ups with several smaller partners like Mazda.
The Nissan-Honda tie-up is a technical partnership, not a capital one. The story floats the idea that Honda (which has taken hits in China too but is doing much better overall) could step in as Nissan's new financial partner. But it's unclear if either side is into that, or if it would even be effective. And would Honda gain much there?
Since announcing their partnership in August, both Japanese companies had played down the possibility of a capital tie-up, with one person close to Nissan saying Honda buying a stake remained “a last resort”.
The people familiar with the matter said the outcome of the talks would present a test case for how companies could survive the industry upheaval, pitting the likes of Stellantis, which was born out of a megamerger, against smaller players such as Renault and Nissan that forge technology and regional partnerships. “Is bigger really better? Or is the partnership model better?” said the senior official close to Nissan, noting that pursuing scale would lead to inefficiency after a certain point.
None of this bodes well for Nissan. We're talking about long-term, capital-intensive businesses, so it's impossible to fathom a 12- to 14-month window where it can get a ton of great hybrids and EVs on the road and win back market share in the U.S. and China. My theory is we could see some kind of restructuring, asset sale or acquisitions in its future rather than an outright end to operations, but how Nissan navigates this next year is anyone's guess.
60%: Hyundai's Secret Weapon In The EV Wars: 'Quality'
Meanwhile, Korea's Hyundai Motor Group is getting a lot right at the moment. Its EVs are selling remarkably well, especially in the U.S., and its extensive portfolio of hybrids are providing valuable cover fire. Yet from all I've heard and seen, including from my own team at InsideEVs, Hyundai's EVs still trail ones from China in terms of technology.
So how does Korea fend off that much larger competitor? Quality, its incoming global CEO José Muñoz told the Korea JoongAng Daily:
Muñoz also said “China is a big threat” to the global auto industry, but Hyundai can put up a challenge in the cutthroat industry with enhanced “technological prowess” and “quality.”
“A lot of consumers, when they buy Chinese products, they realize maybe the quality is not as good as others. They are not happy with the quality, maybe [there is] a mechanical issue or [a problem] with the maintenance,” he said.
“It is the moment to elevate our game in terms of providing not only the best quality but also the best services to our customers. We have been able to attract the best dealers in different countries investing with us and then investing in facilities with equipment and training to provide better service."
The quality and reliability of the Chinese automakers is tough to gauge. By most accounts, they have gotten vastly better at those things in recent years. But without reliable long-term data in the U.S. (or even in Europe) it's hard to say. The Koreans do understand the scope of the threat they face, however; it's not like they haven't been dealing with that beef for literal centuries now.
90%: Mexico's BYD Dilemma
Speaking of China's automakers, they've made huge inroads into Latin America, including just south of the Texas border. Chinese EV giant BYD has long sought a local factory in Mexico. It entered "wait and see" mode with that plant due to the U.S. election, as both the automaker and the Mexican government feared the escalation of a trade war with America.
Basically, BYD has insisted that any car factory in Mexico would be to serve the Latin American market. But it's a no-brainer that such a factory could one day be poised to export cars to the U.S. if trade conditions changed.
Enter: President Donald Trump, who isn't in office yet and is already firing shots at China and Mexico. According to a report in The Wall Street Journal, BYD sounds like it wants to make this happen but Mexico is being especially cautious here:
The plans put Mexico in a dilemma, made worse by Trump’s threat Monday to impose a 25% tariff on Mexican goods. The country is already a major car manufacturing center and generally welcomes foreign investment for the jobs it brings. BYD, which rivals Tesla as the biggest electric vehicle maker in the world, would normally be a prize catch.
But Mexican officials fear a BYD plant would send the wrong message to Trump and the trade hawks around him by suggesting that Mexico wants to be a backdoor for Chinese companies to sell to Americans. The president-elect is also taking aim at Mexico over immigration and smuggling of fentanyl, the issues he cited in the tariff threat.
Mexico says it isn’t aiming to be a conduit for Chinese-made goods and has made strides in addressing illegal immigration. It needs to persuade the U.S. and Canada of that when talks begin next year on extending the U.S.-Mexico-Canada Agreement on free trade reached during the first Trump administration.
[...] The federal government isn’t happy with BYD’s timing and doesn’t want to provoke Trump, said one Mexican official. Federal consent would be essential for any BYD project in Mexico because the company would need environmental and import permits as well as other government support.
I still believe BYD's entry into the U.S. market is a question of when, not if. But all parties involved have a new landscape to navigate.
100%: Where Do You See Nissan In 14 Months' Time?
Pretend for a moment that it's early 2026. Does the once-formidable Japanese automaker pull out of this tailspin, or does it exist in a very different form? Give us your best guesses in the comments.
Contact the author: patrick.george@insideevs.com
