Nissan Shares Surge on Reports of Japanese Consortium Seeking Tesla Investment

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Investment strategy aims to bolster Nissan amidst ongoing challenges

Nissan Motor Co. experienced a significant boost in its stock value following a report by the Financial Times indicating that a high-level Japanese consortium is planning to approach Tesla Inc. for investment. This initiative, led by former Tesla board member Hiro Mizuno and supported by ex-Prime Minister Yoshihide Suga, aims to provide much-needed financial support to the beleaguered car manufacturer.

According to the report, the consortium envisions Tesla as the primary investor, potentially acquiring Nissan's manufacturing facilities in the United States. To mitigate concerns about a complete takeover, the group is also exploring the possibility of including Hon Hai Precision Industry Co. as a minority investor. This strategic collaboration aims to not only secure investment but also ensure that Nissan retains some operational autonomy.

Nissan's shares surged more than 12% following news of the potential partnership. However, the carmaker finds itself in a precarious position, having recently seen the termination of a proposed alliance with Honda Motor Co. This dissolution has exacerbated existing challenges for Nissan, including dwindling sales, excess production capacity, an aging lineup of less popular models, and leadership instability stemming from the fallout of Carlos Ghosn's removal in 2018.

Amid these ongoing difficulties, Nissan's CEO Makoto Uchida has emphasized the company's urgent need for a partnership to ensure its viability. Despite the appeal of collaborating with a high-profile entity like Tesla, such a deal raises questions given Tesla’s own challenges. The electric vehicle manufacturer has faced its own hurdles, including a decline in annual sales for the first time in over ten years and a reduction of more than 10% of its workforce, affecting even its sales teams.

Investment experts, like Yasuhiko Hirakawa from Rakuten Investment Management Inc., express skepticism about the potential benefits for Tesla in acquiring Nissan. Hirakawa notes that Tesla does not require traditional automotive assets, such as engines and assembly lines, suggesting that it might not find any substantial advantages in Nissan's offerings.

In light of Nissan’s current state, other investors have also shown interest. Foxconn has reportedly renewed its interest in Nissan following the fallout with Honda, and there are indications that KKR & Co. is contemplating an investment as well. Nonetheless, Nissan must navigate a challenging restructuring process and face geopolitical uncertainties that complicate its recovery.

Adding to the company's woes, Moody’s recently downgraded Nissan’s credit rating to speculative-grade and maintained a negative outlook. Market analysts highlight that irrespective of the identity of the potential investor, Nissan's restructuring remains essential for the company’s long-term survival and revitalization in the competitive automotive landscape.

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