It's been another week, and UBS analysts are getting bullish on Honda stock amid merger rumors involving Nissan. Meanwhile, Nio is becoming competitive against Tesla, while Baird analysts have expressed doubts about Rivian.
Makoto Uchida, chief executive officer of Nissan Motor Co., left, Toshihiro Mibe, chief executive officer of Honda Motor Co., attend a news conference in Tokyo, Japan, on Monday, Dec. 23, 2024. Honda and Nissan took their first historic steps toward merging and creating a new force in the world's automotive industry as aggressive competition from China forces legacy carmakers to rethink their business models. Bloomberg/Getty Images
Do you have a Honda? asks UBS.
I would not believe you if you told me that Nissan (NSANY) and Honda (HMC) would consider merging someday.
A merger like this is like BMW merging with Mercedes-Benz, Macy's merging with Nordstrom, or Nike merging with Adidas; it's two separate companies we are so used to seeing at each other's throats at the avenues of innovation.
The two Japanese auto giants have made it official that they are in discussions to deepen ties and allow themselves to collaborate more efficiently on technology that would help their respective companies better compete as domestic rivals to Toyota and better equip each other with the tools to compete against Chinese automakers like BYD.
Following earlier reports of the talks, Honda's Executive Vice President Shinji Aoyama told Bloomberg that the company is considering several options, including a merger, capital tie-up, or the establishment of a holding company.
Currently, Honda has one leg-up that Nissan doesn't have: gas-electric hybrid vehicles in its lineup. In a statement, Honda cited a "strong demand for hybrids" for its sales growth, with the 31,551 hybrid models of the Civic, Accord, and CR-V crossover SUV sold in November 2024 making up 28.7% of its sales.
Nissan currently does not have any such vehicles in its U.S. lineup.
The prior news of the Nissan-Honda merger has UBS analysts seeing green. In a note published on December 20, UBS analysts changed the rating on Honda stock from a "Sell" to "Neutral" rating.
In the note, the UBS analysts noted that the potential negative impact that electric vehicles have on Honda's business has already been accounted for in the stock's valuation. Additionally, the firm pointed out that Honda's current market capitalization, which stands at about six trillion yen, or $38.35 billion US dollars, suggests limited downside risk to its stock price.
If there is any indication of a potential merger between Honda, Nissan, and Mitsubishi Motors, UBS notes that such a partnership should offer Honda actual benefits in order for it to happen.
Baird: Trump's behavior may negatively affect Rivian
No matter how you spin it, it's clear that Tesla CEO Elon Musk's noteworthy bromance with President-Elect Donald Trump was a bet that paid out in droves.
Not only has Tesla stock blown up since the day after Election Day, but Elon's new set of friends in Trump's inner circle has adopted him as one of their own, which can be largely symbolized by his new appointment as the co-leader of the soon-to-be-formed Department of Government Efficiency (DOGE).
On December 3, DOGE co-leader, former Republican Presidential candidate, and BuzzFeed stakeholder Vivek Ramaswamy made light of a $6.6 billion loan made out to Tesla competitor Rivian (RIVN) to finish its Georgia factory, calling it a political hack job against his partner and his company.
"Biden is forking over $6.6B to EV-maker Rivian to build a Georgia plant they’ve already halted," Ramaswamy said on Musk's social media network X (formerly known as X). "One “justification” is the 7,500 jobs it creates, but that implies a cost of $880k/job, which is insane. This smells more like a political shot across the bow at @elonmusk & @Tesla."
Though the threat of DOGE taking away Rivian's key funding may be questionable, Baird analyst Ben Kallo said in a note on December 18 that securing the $6.6B loan from the Department of Energy (DOE) and closing its joint-venture deal with VW set it up for growth in the new year.
“With the Volkswagen JV having recently closed and DOE funding announcement (a positive surprise) in the rearview, we see few catalysts in 2025 and expect shares to languish with EV sales, which may be sluggish relative to expectations,” the analyst said. “We remain positive on RIVN’s product/brand and the long-term opportunity which remains intact.”
However, Baird still downgraded shares from outperform to neutral and cut its price target by $2 to $16, citing headwinds including anticipated policy changes under President-elect Donald Trump’s administration, such as the cutting of tax credits meant to encourage new EV purchases.
“While there are several exceptions, we see the landscape for both EVs (inclusive of supply chain) and Renewables as more challenging shortly due to uncertainty regarding the [Inflation Reduction Act] and growth in 2025,” Kallo added.
Move over Model Q; it's time for Nio's Firefly
Do you remember that song called 'Fireflies' by Owl City?
I do, but the fireflies we are discussing here aren't the bugs we see during the summer that we capture in jars for their light.
On December 21, Chinese EV brand Nio (NIO) introduced its 'Firefly' brand, a premium sub-brand under the NIO umbrella designed to compete against small 'boutique' brands like BMW's Mini and the recently linked Mercedes-Benz and Geely joint venture known as Smart.
If you live in cities like New York or Los Angeles, you might be very familiar with this kind of car. Small, easy-to-park runabouts like the Mini Cooper are marketed more like high-priced fashion accessories meant to fit a particular aesthetic than for more practical reasons like fuel economy.
With its new venture, Nio seeks to beat BMW and Mercedes in style, range, and price. While the cheapest Mini in the U.S. costs a whopping $45,200, the Firefly has it beat with a base price in China starting at $20,390.
That is around the same price in China as the discounted electric Mini Cooper. Still, more worryingly, it undercuts Tesla's rumored "Model Q." According to Deutsche Bank analyst Edison Yu, that car is set to be priced at "below $30,000" if subsidies are not taken away during the incoming Trump administration.
Rumor or not, the Firefly is emblematic of a new EV ecosystem that places Tesla further down the food chain in one of its key markets.
As the holidays approach and the year 2024 ends, I hope you have a wonderful holiday. Happy holidays and a happy new year!
