The world was a bit shocked when news of a potential merger between Honda and Nissan was dropped. But the bigger question that crossed many minds was, “Why?” We know Nissan has been in some financial trouble lately, but for Honda to consider throwing it such a lifeline is perplexing. However, new reports indicate that Honda could be a bulwark between Nissan and a potential hostile takeover.

Welcome back to Critical Materials, your daily roundup for all things electric and automotive tech. Today, we’re chatting about Honda and Nissan’s merger talks potentially entering the negotiation phase as early as next week, plus Canoo furloughs even more workers, and Subaru’s secret weapon: hybrids. Let’s jump in.

30%: Honda and Nissan Merger Talks Could Start As Early As Next Week

Photo by: Nissan

The rumors have been circulating all week: industry big-wig Honda and troubled Nissan could be in talks for one of the most unexpected mergers in recent years. While critics remained skeptical of initial reports, Bloomberg confirmed that higher-ups at both companies have been in talks over a deal, and perhaps an even bigger shocker, it could spill over to become a triumvirate that includes Mitsubishi as well.

These types of deals typically move at the speed of molasses. So it should come as a surprise that a new report from Nikkei Asia, the publication that originally reported initial talks of a merger, says that formal negotiations could begin as early as next week on Dec. 23.

Make no mistake—this marriage isn’t really one of convenience. Honda has been working to pivot its focus to electrification for some time. Following a dissolved partnership with General Motors, Honda joined forces with Nissan (and then Mitsubishi) to form a technical partnership to accelerate the development of EV-related tech.

So what’s the rush in speeding up negotiations? For starters, Nissan has a time clock running. Some have pegged the company’s chance for survival requiring a complete financial turnaround in 12 to 14 months.

Other reports suggest that the trifecta alliance was at risk of falling apart after Taiwanese electronics company Foxconn approached Nissan to acquire a stake in the company. Reuters says that Jun Seki, former deputy COO of Nissan who now leads Foxconn’s EV unit, is headed to France to speak with Renault to purchase at least some of the automaker’s stake in Nissan. Renault currently holds a 15% stake in Nissan.

According to reports, Foxconn “directly expressed” its willingness to purchase Nissan equity directly. Honda reportedly threatened to dissolve the partnership if Foxconn were to purchase Nissan, and ultimately Nissan declined to sell to Foxconn. The Taiwanese company then approached Renault.

Here’s where things get interesting. Bloomberg says that Honda could be positioning itself as “a white knight in the event of a hostile takeover attempt,” which may be exactly what’s starting as Foxconn has reportedly approached Renault about purchasing the shares given that Nissan has already declined to sell.

Either way, company officials have yet to comment about talks of the merger publicly other than a joint statement addressing that the brands were “considering various possibilities for future collaboration.” 

60%: Canoo Furloughs Even More Workers

It’s starting to sound like a broken record at this point, but EV startup Canoo is in trouble. Yes, again. Or maybe still. Either way, the startup has once again furloughed employees and is officially pressing pause on its Oklahoma manufacturing plant in order to scrape together funds to stay afloat.

Its decision to furlough 82 of its remaining employees comes just over a month after it decided to furlough about 30 people in November, bringing an estimated 90-day halt to more than 130 workers. The brand went from 800 employees at its peak in 2021 to a currently unspecified number. Its most recent round of furloughs represents both salaried and hourly employees and is a grasp to remain alive as it remains in “advanced discussions with various capital sources,” according to a filing with the U.S. Securities and Exchange Commission.

TechCrunch points out a few recent events that led up to today’s furloughs:

The announcement comes just a few days after board member James Chen resigned, and roughly one month after the company saw its chief financial officer and head lawyer depart. Canoo is also facing multiple lawsuits from suppliers over alleged late payments.

 

The new furloughs cap what has been a rough year for the startup. The company has undergone multiple rounds of layoffs and furloughs, and closed the Los Angeles office that used to serve as its headquarters. Canoo’s chief technology officer left in August, and all of the company’s founders are now gone. In the meantime, it has been kept afloat by loans from the venture firm run by its CEO, Tony Aquila.

“We regret having to furlough our employees, especially during the holidays, but we have no choice at this point,” wrote Canoo in a statement published by TechCrunch. “We are hopeful that we will be able to bring them back to work soon.”

As for the idled plant, it’s not quite clear exactly what Canoo is manufacturing in Oklahoma right now. The most obvious answer is debt, as the brand isn’t exactly pumping out vehicles left and right. Sure, it had some trial contracts with the U.S. Department of Defense, NASA, the U.S. Postal Service, and the State of Oklahoma, but Canoo’s future was far from its original plans of being a consumer-facing EV manufacturer with some pretty darn cool cars.

The future for Canoo looks bleak. Lawsuits over unpaid bills, furloughed employees, and little commercial interest in its vehicles being communicated to the public make it seem like the brand could go belly-up in the coming months without a sack of investor cash being dropped on its doorstep.

90%: Subaru’s Secret Weapon Is Its New Hybrid Plant

Subaru is well known for its rugged all-wheel-drive cars—whether it be sporty sedans like the WRX or capable family SUVs like the Ascent, the automaker has a reputation for being the go-to brand in many parts of the world are plagued with less-then-stellar weather. However, one thing that Subaru isn’t exactly known for is electrification.

The brand has admittedly had a late start to the EV game. Its only EV on sale today, the Solterra, was brought to market with the help of Toyota. As will its next four EV models if its joint-development partnership continues as planned. Subaru has found itself in a bit of a conundrum—it doesn’t yet have the battery tech to compete with the rest of the industry on its own, and with strict emission regulations cracking down across the globe, its hybrid game could use some work, too. Thankfully, the automaker has a Hail Mary up its sleeve for the latter, according to Automotive News.

See, Subaru wants to electrify all its models in the first half of the 2030s. This means either going full battery-electric (as it’s doing with the help of Toyota on some models) or varying degrees of hybridization, both standard and plug-in.

Enter the Kitamoto factory. This plant has been around since 1995 and has served Subaru well for non-passenger car needs (think industrial equipment, snowmobiles, and the like). The automaker phased out this area of its business in 2019 and has since chosen the facility to be the home of its new hybrid transaxle—the last-ditch effort to keep its venerable Boxer engine alive in a world where there are plenty of more efficient choices to choose from.

Kitamoto is Subaru’s answer to a stop-gap between combustion and full electrification. The brand plans to apply the lessons learned at Kitamoto to its next-gen Oizumi plant that will build future EV and hybrids after 2027.

This particular plant has started the production of Subaru’s new electrified transaxle that will power a new generation of strong hybrids beginning with the next-gen Crosstrek and Forester crossovers. In Japan, this will begin as early as Spring 2025. The U.S. will receive the transaxle the following year—built in Kitamoto and shipped to its plant in Lafayette, Indiana where the next-gen Forester will be built.

Photo by: US Energy Information Administration

The U.S. market accounts for 71% of Subaru’s global sales. And hybrids? Well, Americans are lapping them up as of late. In fact, hybrids made up 10.8% of the entire light-duty vehicle market last quarter, significantly ahead of the 7% share for BEVs in Q3. To remain relevant, Subaru needs to compete in the hybrids segment, and its underpowered mild hybrids have historically not been the right answer.

So while Subaru might not be at the forefront of pure electrification, it is pouring its heart into pumping up its hybrid offerings to keep competing in global and U.S. markets. Kitamoto will prove to be Subaru’s proving ground—that it can scale and compete with even the biggest player. More importantly, it means keeping a legend, its horizontally opposed Boxer motor, alive.

100%: Is Subaru’s Hybrid Push The Right Direction?

Subaru’s push forward with hybrids over pure electrification is an interesting one. The brand is a small player compared to other Japanese giants, which means that dumping billions of dollars into a homegrown electrification program isn’t as easy as, say, Ford, GM, or any other the big European brands out there. Joining forces for development (like it’s done with Toyota already) is a logical step forward.

Other big automakers are also pulling back from their once-big electrification plans and others have always insisted that a “multipathway” approach was the right way to go.

Do you think that Subaru’s approach will work in the long run? Where might it run into some hurdles along the way? Let me know your thoughts in the comments.